Jefferies Financial Group CEO Rich Handler said Thursday that the Wall Street investment bank was defrauded by bankrupt auto parts manufacturer First Brands Group, marking the latest fallout from a corporate collapse that has rattled U.S. credit markets.

“I’ll just say this is us personally — we believe we were defrauded,” Handler told analysts and investors during the firm’s investor day, according to a regulatory filing released Friday.

He did not provide specific details about the alleged fraud, but said Jefferies remains confident in the overall business environment despite the episode.

His comments come as the U.S. Department of Justice investigates First Brands Group and as several financial institutions have reported potential losses tied to the company. The auto parts maker filed for bankruptcy protection in late September, listing more than $10 billion in liabilities, sending shockwaves through leveraged credit markets.

Fallout Across Credit Markets

The collapse of First Brands — alongside that of subprime lender and car dealership Tricolor — has deepened concerns in Wall Street’s multitrillion-dollar credit ecosystem, which spans leveraged loans, collateralized loan obligations (CLOs), trade-finance funds, and subprime auto lending.

“I’m not saying there aren’t other issues like this,” Handler said. “I think there’s a fight going on right now between the banks and direct lenders who each want to point fingers at each other and say, ‘It’s your fault, no, it’s your fault.’”

Those remarks point to growing tension between traditional banks and private credit funds, as both sides grapple with defaults that threaten to expose weaknesses in risk management and underwriting standards across the market.

Jefferies’ stock tumbled sharply after First Brands’ bankruptcy filing, though it rebounded 5% on Friday after Thursday’s steep selloff. Analysts at Oppenheimer said the drop was driven largely by “atmospheric” credit concerns rather than by any material financial weakness at Jefferies, noting that credit managers, business development companies (BDCs), and several banks had come under similar pressure.

Jefferies President Brian Friedman stressed that the investment bank’s exposure to First Brands was isolated from its core operations.

“Kind of Chinese Wall 101. Nothing more to be said,” Friedman told investors. “The two have absolutely no relationship and, in fact, the decision in 2019 of the asset management Point Bonita team to engage with First Brands was absolutely independent and disconnected from anything on the investment banking side.”

Friedman said the fund involved was managed by Leucadia Asset Management, a Jefferies subsidiary that oversees alternative investments. Jefferies disclosed earlier this month that Leucadia holds about $715 million in receivables tied to First Brands but reiterated that its direct exposure after potential recoveries is under $100 million.

“We’ve estimated the firm’s direct exposure to the First Brands fallout to be relatively small — comfortably under $100 million,” said Morningstar analyst Sean Dunlop, noting that the potential loss is “readily absorbable” given Jefferies’ capital position.

Broader Sector Ripples

The First Brands bankruptcy has compounded broader credit jitters in the U.S. banking sector. Shares of several regional lenders slumped this week after Zions Bancorporation disclosed a $50 million charge-off in the third quarter, while Western Alliance Bank filed a lawsuit alleging borrower fraud.

The concerns briefly spilled over into European and Asian markets, where investors reacted to fears of contagion in corporate credit. However, U.S. banking stocks later recovered after a series of strong earnings reports reassured investors about the sector’s underlying health.

DOJ Probe Deepens

Meanwhile, the Justice Department’s probe into First Brands is said to be focusing on accounting irregularities and the company’s relationships with key creditors, according to people familiar with the investigation. The inquiry is expected to widen as regulators examine whether the company’s financing structure concealed deeper liquidity problems.

Handler’s acknowledgment of fraud adds a personal dimension to Jefferies’ response and underscores how the First Brands collapse has become a flashpoint for tensions between traditional and private lenders in the $1.6 trillion leveraged-loan market.

Jefferies insists the damage is currently contained. But the episode highlights a larger question looming over Wall Street: whether the boom in complex, high-yield lending over the past decade has left the financial system vulnerable to more hidden risks — risks that may only surface when credit conditions tighten.

Micron Technology, the U.S. semiconductor manufacturer, is pulling out of China’s data center chip market after the business failed to recover from Beijing’s 2023 ban on its products in critical infrastructure, Reuters reports, citing two people briefed on the decision.

The move points to the deepening decoupling between the world’s two largest economies in advanced technology sectors and highlights how Washington’s trade restrictions have triggered retaliatory measures from Beijing, reshaping the global semiconductor industry.

Micron was the first major American chipmaker to be directly targeted by the Chinese government, a move widely interpreted as retaliation for U.S. export controls aimed at curbing China’s access to advanced chips and manufacturing equipment. The company’s withdrawal signals that the lingering effects of the ban have rendered its data center operations in China commercially unviable.

Micron shares slipped about 1% following reports of its exit. In a statement to Reuters, the company acknowledged that the data center division had been impacted by the ban and emphasized that it “abides by applicable regulations where it does business.”

Micron will continue to supply chips to two Chinese companies that operate major data centers outside mainland China, including Lenovo, the Hong Kong–listed technology giant. However, its domestic data center business in China will wind down. Micron generated about $3.4 billion — roughly 12% of its total revenue — from mainland China in its most recent fiscal year, with the bulk of that coming from sales to smartphone and automobile manufacturers. Those segments will continue, according to one of the sources.

Industry analysts said the company’s strategic withdrawal reflects a broader realignment of semiconductor supply chains.

“Micron will look for customers outside of China in other parts of Asia, Europe and Latin America,” said Jacob Bourne, an analyst at Emarketer. “China is a critical market, however, we’re seeing data centre expansion globally fueled by AI demand, and so Micron is betting that it will be able to make up for lost business in other markets.”

The company’s exit also comes amid heightened U.S.-China tensions that have persisted since 2018, when then-President Donald Trump imposed sweeping tariffs on Chinese goods and tightened scrutiny on technology transfers. Washington subsequently targeted Chinese tech firms such as Huawei, accusing them of posing national security threats — allegations Beijing and the companies involved have consistently denied.

Micron’s troubles began in May 2023 when China’s cyberspace regulator barred its chips from being used in key infrastructure, claiming the products posed “significant security risks.” The U.S. government responded by calling the move “economic coercion” and defending the security of American chip technologies. Although China has since expanded its domestic chipmaking capacity, the action against Micron marked one of its few large-scale regulatory interventions against a U.S. firm in response to Washington’s sanctions.

The ban has cost Micron dearly in what remains the world’s second-largest market for server memory chips. Chinese investment in data centers surged ninefold last year to 24.7 billion yuan ($3.4 billion), according to a Reuters review of government procurement records. That boom has instead benefited Micron’s global rivals — South Korea’s Samsung Electronics and SK Hynix — as well as Chinese semiconductor firms YMTC and CXMT, which are expanding with heavy state support.

While Micron has struggled to regain its footing in China, the company has simultaneously been buoyed by the explosion in demand for artificial intelligence infrastructure elsewhere. The global buildout of AI-driven data centers has helped offset its losses in China, allowing Micron to post record quarterly revenue this year.

Even so, the company continues to scale down parts of its Chinese operations. Reuters reported that Micron employs over 300 people in its China data center team, though it is unclear how many positions may be affected by the pullout. The chipmaker also laid off several hundred employees in August from its universal flash storage program in China after announcing it would end development of mobile NAND products globally.

However, Micron maintains a significant presence in the country through its packaging and testing facility in Xi’an, one of its largest operations outside the United States.

“We have a strong operating and customer presence in China, and China remains an important market for Micron and the semiconductor industry in general,” the company said in its statement.

For now, Micron’s exit from China’s data center market signals a turning point in the long-simmering tech rivalry between Washington and Beijing. As both powers deepen restrictions on each other’s technology sectors, global semiconductor supply chains are being redrawn. While Chinese chipmakers continue to ramp up local production, American firms are accelerating efforts to diversify markets and reduce supply to China.

The consequence, experts say, is a more fragmented global tech ecosystem — one in which geopolitical considerations increasingly shape where and how advanced chips are produced, sold, and deployed.

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