Barclays is facing legal action over funds held in accounts linked to Market Financial Solutions (MFS), a shadow banking firm that collapsed earlier this year amid fraud allegations. Administrators from AlixPartners, appointed by some of MFS’s creditors, have initiated a case at the High Court seeking to recover money they say is owed by Barclays.

MFS, which did not take deposits but financed its loans through borrowing from banks and other lenders including Barclays, Santander, Wells Fargo, and Jefferies, entered administration in February. The collapse followed claims that at least £1.3 billion had been misappropriated from the company. Barclays provided banking services to MFS and several of its associated lending vehicles, as well as extending credit facilities to the firm.

Barclays disclosed its exposure to MFS to be approximately £500 million, with an expectation of recovering over half of that amount. However, administrators representing various creditors have accused Barclays of withholding cash balances held in accounts linked to MFS. According to Begbies Traynor and Coots & Boots, firms acting for other creditors, Barclays has declined to transfer credit balances believed to be owed to those creditors.

Barclays has defended its actions on the grounds of ongoing fraud investigations involving MFS and the presence of freezing orders relating to certain individuals connected to the case. There are also claims that Barclays may have certain rights or claims over the disputed funds, complicating the issue.

The High Court case will determine whether Barclays is legally obligated to release the funds to the administrators and creditors of MFS. Both Barclays and AlixPartners have chosen not to comment on the matter publicly. The outcome of the litigation could have significant implications for other creditors seeking to recover assets following the collapse of the shadow bank.