A car lender that collapsed in September is now at the center of a criminal case. Federal prosecutors in Manhattan have charged Daniel Chu, founder and CEO of Tricolor Holdings, and chief operating officer David Goodgame with running what they call a multiyear, "systematic" fraud that helped the now-bankrupt subprime auto lender secure billions of dollars from banks and investors, CNBC reports. From at least 2018 through September 2025, the indictment says, the executives inflated the value of loan collateral and misled financiers about the company's true condition.
US Attorney Jay Clayton said Chu turned fraud "into an integral component of Tricolor's business strategy" by routinely lying to banks and other lenders, the AP reports. As part of their alleged scheme, the same auto loans were pledged to multiple lenders at once and distressed or written-off loans were recast to look like solid assets. Authorities said two other Tricolor execs, including a former chief financial officer, were cooperating with investigators after pleading guilty to charges Tuesday.
According to the indictment, Chu and other execs initially tried to conceal the fraud after they were confronted by lenders in August. Chu extracted more than $6 million from the company around that time, using some of the funds to buy a home in Beverly Hills in August, prosecutors say. Tricolor, which catered to buyers with weak or limited credit in the South and Southwest, filed for Chapter 7 bankruptcy in September. ABC News reports prosecutors said at the time that its lenders, including JPMorgan Chase, Fifth Third Bancorp and Barclays, had suffered multi-million-dollar losses. They had extended hundreds of millions of dollars in credit to Tricolor and related borrower First Brands before both companies went under in the same month.
The twin failures triggered a bout of market anxiety over hidden trouble in private credit and leveraged loans. JPMorgan CEO Jamie Dimon, whose bank was among Tricolor's lenders, warned at the time that the episodes pointed to years of overly loose corporate lending. "When you see one cockroach, there are probably more," Dimon told analysts, adding that investors and regulators "should be forewarned on this one."
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