The UK’s financial regulator has launched an investigation into Market Financial Solutions (MFS), the mortgage lender that collapsed last month amid allegations of fraud.

The move follows the granting of a £1.3bn worldwide asset-freezing order on MFS founder Paresh Raja on Wednesday, as creditors successfully gained court orders in London and Dubai barring the tycoon from dissipating assets.

On Friday, the Financial Conduct Authority said it had “opened an enforcement investigation” into the stricken mortgage lender, which borrowed £1.3bn from a string of financial companies and slumped into administration in February.

Companies owned by Raja borrowed from a series of financial institutions – including banks and hedge funds – before loaning that cash to MFS, which extended mortgages to customers.

Creditors have alleged in court documents that some of the borrowers that ultimately received mortgages from MFS were actually connected to Raja, as part of a structure that “may have been a device designed to extract monies … on false pretences”.

There are also concerns that some loans may prove to be unsecured, with allegations that security had been granted to two or more financial institutions at the same time over the same property, in a process known as “double pledging”.

The financial institutions that appear to be on the hook include banks such as Barclays, Jefferies and Santander, as well as hedge funds and “private credit” lenders including Elliott Management, Castlelake and Apollo’s Atlas SP unit.

CS Venkatakrishnan, the chief executive of Barclays, said on Wednesday that the bank’s anticipated losses would be “materially lower” than £500m, the amount MFS owes the bank.

A spokesperson for Raja declined to comment. The financier’s lawyer has previously told the Daily Telegraph: “Mistakes have been made but there has been no intention to defraud whatsoever and Mr Raja has not been the beneficiary of any shortfall (if any) there may be.”