Here's what you need to know
- First Brands — parent company of brands such as Fram, Autolite, International Brake Industries, Luber Finer, Raybestos, Cardone, and others — filed for Chapter 11 bankruptcy in September.
- In January, the company announced it was for sale, soon followed by the indictments of two executives, brothers Patrick and Edward James. A third has plead guilty and is cooperating with prosecutors. The James brothers plead not guilty.
- In February, First Brands suddenly shuttered several facilities and immediately laid off workers, saying a purchase deal had fallen through and no money was available to keep them open.
Jefferies Financial Group, an investment bank headquartered in New York City, is being sued by investors over exposure to losses tied to the First Brands collapse.
The Financial Times has reported the U.S. Securities and Exchange Commission is also looking into Jefferies' involvement with First Brands. The SEC does not comment on whether or not there are possible investigations.
Investors with Eugenia II and Eugenia III Investment Holdings in the British Virgin Islands say Jefferies and its Point Bonita Capital fund claimed to have cash dominion over receivables bought from First Brands. However, they say, First Brands retained control while committing fraud, including double-pledging collateral. The investors claimed they could have put their funds elsewhere except for Jeffries' misconduct.
[IN OTHER NEWS: Genuine Parts Company to split automotive, industrial businesses]
The plaintiffs are seeking $18.4 million in damages, the amount they say is the difference between their investment's current value and what they believe they could have earned otherwise. They say they invested $25 million into Point Bonita, expecting payment from First Brands' invoiced obligations. Instead, they say, the funds were lost in fraudulent operations and the bankruptcy process.
Jeffries denies the accusations. It previously disclosed the Point Bonita fund held about $715 million in receivables linked to First Brands and says it was also one of the victims of the company's fraud.
Separately, capital firm Raistone, based in New York, is liquidating after its exposure to First Brands and a collapsed sale. It's been reported that First Brands was responsible for the majority of Raistone's income.
First Brands declared Chapter 11 bankruptcy in September and announced it was for sale in January. Brothers Patrick and Edward James, the former CEO and a former senior executive, were indicted on charges of conspiracy to commit wire fraud and bank fraud, conspiracy to commit money laundering and multiple counts of wire and bank fraud. Peter Andrew Brumbergs plead guilty and is cooperating with prosecutors.
The brothers have plead not guilty.
In the Chapter 11 filing, First Brands estimated its total liabilities as between $10-$50 billion. More than $2 billion was unaccounted for.
Investigators allege that from 2018-2025, the James brothers built and then bankrupted the aftermarket parts supplier by creating fake and falsely inflated invoices, double- and triple-pledging loan collateral, falsifying corporate financial statements and concealing liabilities from lenders. First Brands raked in billions in financing, U.S. attorneys say, and the brothers got millions in proceeds.
Earlier this week, First Brands suddenly shuttered factories and other facilities as a sale deal fell through.
"Regrettably, in the absence of a sale, the company does not have access to capital markets or cash reserves that would allow operations to continue," a layoff notice letter to the city of Emporia, Kan., home of First Brands' Hopkins Manufacturing, says.
