(Bloomberg) -- US prosecutors charged the founder of bankrupt subprime auto lender Tricolor Holdings with conspiring to defraud lenders and investors, in a sweeping indictment of the leadership of a used car dealer and financing company that collapsed in a wave of scandal in September.
The indictment accuses Daniel Chu and other executives who had worked at Tricolor of operating the company through "systemic fraud." Tricolor filed for bankruptcy in September after shutting down more than 60 locations across the US Southwest.
Prosecutors said at Chu's direction, executives repeatedly defrauded lenders through various schemes including "double-pledging" collateral and manipulating the descriptions. They also said Tricolor classified assets pledged for collateral to make "near-worthless" assets appear to meet lenders' requirements.
The newly unsealed charges provide the most detailed account yet of misconduct that lenders, investigators, and bankruptcy officials had been trying to untangle since Tricolor's collapse. Bloomberg reported earlier this year that federal prosecutors had begun examining whether the company had misled banks and double-pledged collateral across warehouse credit lines. Lenders including JPMorgan Chase & Co., Barclays PLC, and Fifth Third Bancorp. have been preparing for significant losses tied to the company's facilities.
"Tricolor defrauded multiple lenders, they told multiple lies and most disturbingly the direction to do it came from the top," Manhattan US Attorney Jay Clayton said in a press conference Wednesday morning.
Chu, 62, and David Goodgame, 49, the company's former chief operating officer, are charged with multiple counts including operating a continuing financial crimes enterprise, which carries a minimum of 10 years in prison. Federal prosecutors also unsealed charges against other former company officials including Jerome Kollar, and Ameryn Seibold.
Kollar, 62, and Seibold, 31, a former finance executive, both pleaded guilty Tuesday to fraud charges in federal court in Manhattan and are cooperating with the government. Chu is expected to be appear in federal court in Florida later today, while Goodgame is scheduled to appear Thursday in Texas.
Guilty Pleas
Chu, Kollar and Goodgame didn't immediately respond to requests for comment. Seibold couldn't immediately be reached.
According to the charging document, Tricolor "maintained inflated borrowing base data and repeatedly double-pledged the same collateral to multiple lenders, causing the lenders to advance funds Tricolor was not entitled to."
Prosecutors outlined a pattern in which loans that were delinquent, charged off, or previously sold were allegedly still reported as eligible collateral. By September 2025, Tricolor had pledged about $2.2 billion in assets to lenders, although internal records showed only about $1.4 billion in real collateral.
The case has drawn focus from banks and bondholders across the asset-backed securities market, which depends on accurate loan-level reporting to evaluate risk. Tricolor had marketed itself as a data-driven lender with sophisticated underwriting and analytics, positioning its loan book as a prime candidate for securitization.
'Means of Survival'
Prosecutors said that the alleged fraud consisted of two primary mechanisms. Chu, Goodgame and their conspirators would first pledge the same auto loans to lenders twice, and they would manipulate loan data to make ineligible, delinquent auto loans appear to be current and compliant with lender requirements. In addition, the indictment says, the conspirators fabricated backup records such as fake customer payments.
"Under Chu's leadership, this activity became Tricolor's routine manner of business and eventually Tricolor's means of survival," prosecutors said.
For example, in or about 2018 prosecutors said that Tricolor was facing liquidity pressure and that Chu allegedly told Kollar to use delinquent loans to obtain credit from one of Tricolor's unnamed financial lenders, which it describes only as "Lender 1." The loans were so past due that Tricolor itself had charged them off as losses, but Chu told Kollar to create a fictitious portfolio company in Tricolor's dealer management system to make the loans appear to be performing loans, the indictment said.
Chu and his co-conspirators fradulently pledged charged-off loans to Lender 1 "for years" until Tricolor collapsed, the indictment said. By at least 2021, the manipulation expanded beyond Lender 1, it said.
The case is US v Chu, 25-cr-579, US District Court, Southern District of New York.
--With assistance from Bob Van Voris.
(Updates with additional details from indictment. A previous version corrected details of the penalty associated with the charges.)
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