Jefferies Shares Plunge Amid Fraud Allegations Tied to First Brands Exposure

Jefferies Financial Group faces mounting scrutiny as CEO Richard Handler alleges fraud linked to the firm's substantial exposure to First Brands Group, a bankrupt auto parts supplier. The investment bank had facilitated billions in debt financing for First Brands while also holding significant exposure through its Point Bonita Capital arm. Shares of Jefferies have plummeted 25% over the past month.

The revelation came during a tense investor day where analysts grilled management about risk controls. "We believe we were defrauded," Handler stated bluntly. Point Bonita's $715 million exposure to First Brands has drawn sharp criticism, with one investor calling it a "risk management 101 failure."

The situation reflects broader credit quality concerns battering regional banks. The KBW Regional Bank Index dropped 6% Thursday alone, with Western Alliance and Zions Bank disclosing similar issues with problematic borrowers. Separate troubles at auto lender Tricolor suggest these may not be isolated incidents.