DOJ Opens Probe Into First Brands' Shocking Bankruptcy

https://www.zerohedge.com/markets/doj-opens-probe-first-brands-shocking-bankruptcy

Citing "people familiar", the FT reports that the Department of Justice has opened an inquiry into the collapse of the bankrupt First Brands Group, as federal prosecutors look to untangle how investors and creditors have been left with billions of dollars in potential losses, in what may be very bad news for the company's banker, Jefferies, which in August was preparing to do a $6 billion refi of the company only to see it slide in bankruptcy a month later. No surprise Jefferies stocks has plunged 30% in the past 3 weeks. 

The probe is being led by the US attorney’s office for the Southern District of New York, the Manhattan unit that handles large, complex white-collar cases. The inquiry, which is in its earliest stage, has been described as a fact-finding mission given the company filed for bankruptcy protection less than two weeks ago, and many of the details about First Brands’ finances remain unclear.

To be sure, it is not unusual for prosecutors to open investigations when there are public reports of large financial losses stemming from alleged irregularities, and the bar for doing so is low. While the FT notes, that such probes do not necessarily mean any wrongdoing has occurred and may not lead to charges being filed or cases being brought, in this case - where over $2 billion appears to be definitively missing - wrongdoing is all but certain.

As we reported yesterday, on Wednesday one of the largest creditors to First Brands alleged that as much as $2.3bn had “simply vanished” as part of the company’s abrupt failure. That lender, one of several who had provided off-balance sheet financing relying on that collateral, is now pushing for an external investigation into the company’s actions leading up to the bankruptcy.

“The debtors should not be permitted to appoint the very parties that will investigate their own potential misconduct,” the counsel for Raistone, one of the companies that helped arrange off-balance sheet financings for First Brands, wrote in an emergency petition last night.

There's that $1.9B figure again. Last time around the morgue "acquired" the assets of WaMu but no liabilities for 1.9B courtesy Hair Bair FDIC.

This one looks to be interesting.

Let's see what happens