WOW, he does not want to continue in this yeshiva, and he is right – it is normal that a person who feels he cannot be successful, should wish to end that endeavor – but if you want your son healthy, I believe you must (calmly but firmly) insist on a game plan.
Since it does not appear that he is open to being mentored or getting counseling, have you considered choosing with him an out of town/country school? For a person who wants it, it can give him a fresh start. He will lose the intense influence that his crowd is giving him, it can open his eyes to different ways of being an ehrliche Yid, and it can give him the space to come to an understanding of his own relationship with Hashem and people.