A leading Wall Street investment bank’s top executive claims to have been “defrauded” in the bankruptcy saga surrounding First Brands Group, a collapse that now threatens a chain reaction across global credit markets. At the same time, legendary short-seller Jim Chanos, famed for his role in exposing the Enron scandal, has drawn ominous parallels between this moment and that one, warning this may be another watershed moment for Wall Street.
Jefferies CEO Rich Handler told investors on Thursday that the bank believes it was “defrauded” after being grilled over its exposure to First Brands Group’s bankruptcy, which the bank disclosed in an SEC filing. Handler’s comments followed an investor letter released by Jefferies on Sunday, revealing the bank’s stake in First Brands’ debt—originally thought to be as high as $715 million—is closer to $45 million, a figure it claims is absorbable and not threatening to Jefferies’ overall financial health. Nonetheless, the bank’s share price has plunged over 20% since the bankruptcy unfolded last month.
