A spokesman for Jefferies declined to comment. The news was announced in an internal Jefferies memo Wednesday morning.
Kelly's wife, Christina Di Mauro Kelly, filed papers in late October as part of a divorce proceeding in an attempt to regain custody of their two daughters and receive $7 million in damages. In the documents, she described her husband as the "ringleader" of a "drug cohort" of financial and corporate industry pros who mixed business with pleasure by partying in Manhattan, Las Vegas, the Hamptons and other moneyed locales.
The allegations were strongly denied by Jefferies, Sage Kelly and others mentioned.
After a flurry of media attention, Kelly took voluntary leave from Jefferies. His duties were temporarily assumed by the overall head of investment banking, Ben Lorello. Jefferies' leadership also backed their team in an unusual public statement, going so far as to take impromptu drug tests, which all were said to pass.
Christina Kelly then issued a partial apology for the situation as the two former spouses settled their case.
"A substantial portion of what has been written in the press and other media over the past few weeks is inaccurate, untrue or hyperbolic, and I apologize to those who have been affected thereby - including those at Jefferies and those associated with Jefferies," Kelly said in a statement.
Read More Wife in Jefferies scandal: 'I apologize'