The US prosecutors have charged several senior executives of the subprime auto loan firm Tricolor with participating in a long-running “systematic fraud” scheme, deceiving both borrowers and investors.
Tricolor Holdings is a Dallas-based auto loan firm that specializes in providing loans to borrowers with low credit scores.
According to a indictment released by the Southern District of New York Attorney’s Office on Wednesday, at least from 2018 to September 2025, Tricolor’s founder Daniel Chu and former COO David Goodgame orchestrated a series of fraudulent schemes, involving double pledging and altering the nature and value of loan collateral, leading to the company defrauding hundreds of millions of dollars from several major banks and investors.
Prosecutors allege that Tricolor intentionally classified mortgage assets to make nearly worthless assets appear to meet the lenders’ requirements.
Tricolor filed for bankruptcy in September after closing over 60 stores in the Southwest US. Since the collapse, lenders, investigators, and bankruptcy officials have been working to unravel the situation. Lending institutions including JPMorgan Chase, Barclays, and Fifth Third Bank have been preparing for significant losses related to Tricolor.
Fifth Third Bank, one of Tricolor’s securitization partners, disclosed it would incur $200 million in losses related to Tricolor. JPMorgan Chase and Barclays are also facing similar loan losses.
Shortly after Tricolor’s collapse due to fraud allegations, the major auto parts supplier First Brands also filed for bankruptcy. Subsequently, a New York-based telecom company went under. The successive collapses of these three companies have sparked fears in the credit market and exacerbated concerns about overheating in the credit market.
The unsealed indictment on Wednesday provides the most detailed description of Tricolor’s misconduct to date.
Manhattan federal prosecutor Jay Clayton stated in a press conference on Wednesday morning, “Tricolor defrauded multiple lending institutions, telling countless lies. What’s most disturbing is that these actions were directed by the company’s top management.”
Chu and Goodgame are facing multiple charges, including operating a continuing financial crimes enterprise, with a minimum sentence of 10 years in prison.
Federal prosecutors also announced charges against other former company executives, including Jerome Kollar and Ameryn Seibold.
Christopher Raia, Assistant Director of the New York FBI, stated during the press conference that Kollar and Seibold have pleaded guilty to federal charges.
The indictment reveals that Tricolor “inflated loan base data and repeatedly pledged the same collateral to multiple lending institutions, resulting in these lenders disbursing funds to Tricolor that they were not entitled to receive.”
Prosecutors noted that Tricolor also intentionally included delinquent, canceled, or already sold loans as eligible collateral. As of September 2025, Tricolor had mortgaged approximately $2.2 billion in assets to lending institutions, but internal records show the actual collateral was only about $1.4 billion.
Tricolor claimed to be a data-driven lending institution with advanced underwriting and analytical capabilities, positioning its loan portfolio as an ideal candidate for securitization.
The Wall Street Journal reported that Tricolor’s target customers were borrowers with poor credit histories or those unable to obtain financing elsewhere, including undocumented immigrants without social security numbers.
Additionally, a group of creditors holding securities backed by auto loan debt have recently filed an application with the bankruptcy court requesting an investigation into whether the banks lending to Tricolor were aware of its issues before the company’s collapse.