Tricolor executives charged with 'systematic fraud' after subprime auto lender roiled banking sector
Prosecutors allege senior managers orchestrated schemes that allowed Tricolor to obtain billions of dollars from lenders by misrepresenting collateral.
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A Tricolor dealership in Mesa, Arizona, US, on Wednesday, Sept. 24, 2025.
Mark Felix | Bloomberg | Getty Images
U.S. prosecutors charged top executives of bankrupt subprime auto lender Tricolor Holdings with what they described as a years-long, "systematic fraud" scheme that sent shockwaves through the banking sector earlier this year.
In an indictment unsealed in Manhattan, prosecutors allege that from at least 2018 through September 2025, founder and CEO Daniel Chu and chief operating officer David Goodgame orchestrated a series of fraudulent schemes that let Tricolor obtain billions of dollars from lenders and investors by misrepresenting the value of its loan collateral.
Tricolor sold used cars to customers with limited or poor credit in the south and southwest, and told the court they had more than $1 billion in assets at the time of it declared bankruptcy in September.
Tricolor executives repeatedly pledged the same auto loans to multiple lenders at the same time, or "double-pledged" assets to banks, and manipulated loan data so that delinquent or charged-off loans appeared eligible for financing, the indictment said.
Major banks including JPMorgan had lent hundreds of millions of dollars to Tricolor by the time it failed, fueling concern on Wall Street that stresses in the private credit and leveraged lending markets might spread.
JPMorgan CEO Jamie Dimon said the bankruptcies in the U.S. auto market are a sign that corporate lending standards grew too lax in the past decade-plus.
"When you see one cockroach, there are probably more," Dimon said in a conference call in mid-October. "Everyone should be forewarned on this one."
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