Jefferies has written down its entire financial exposure to collapsed car parts supplier First Brands to zero, marking a $10 million loss after adjusting for compensation and taxes. The Wall Street firm disclosed the write-off in its first-quarter earnings report, acknowledging the high-profile legal battle that has ensnared the bank since First Brands filed for bankruptcy last year.

Arizona-based Western Alliance has filed a lawsuit against Jefferies, alleging breach of contract and fraud over a loan to a Jefferies-managed fund that financed First Brands. The investment bank's exposure stemmed from Point Bonita, a fund that provided hundreds of millions in off-balance sheet financing to the now-bankrupt supplier. Jefferies is also under investigation by the SEC for disclosures made to Point Bonita investors.

The write-down comes as Jefferies faces mounting scrutiny over its lending practices. The bank's shares have plummeted more than 35% this year, closing 2.2% lower at $39.64 on Wednesday. Reports suggest Sumitomo Mitsui Financial Group is exploring a potential takeover of the embattled Wall Street firm, having already increased its stake to 20%.