The fallout from Tricolor Holdings’ bankruptcy continues, with top executives at the company now charged with “systematic fraud.”
The details: In an indictment unsealed in a Manhattan federal court, U.S. prosecutors lay out a series of deceptive schemes that the subprime lender’s founder and CEO (at the time) Daniel Chu and COO David Goodgame allegedly engaged in from 2018 through September 2025.
Top executives repeatedly “double pledged” auto loans to multiple lenders and manipulated data so that delinquent or charged-off loans appeared eligible for financing.
Tricolor also obtained billions of dollars from investors and lenders, including JP Morgan and Jeffries Financial Group, by misrepresenting the value of its loan collateral with this scheme.
Also unsealed were the guilty pleas of Tricolor’s former CFO, Jerome Kollar and Ameryn Seibold, a former finance executive for Tricolor, who both pled guilty to fraud.
Worth noting: Prosecutors said Chu and other executives initially tried to hide the discrepancies, blaming it on an administrative error. But when that failed, Chu withdrew more than $6 million from the company before Tricolor placed over 1,000 employees on unpaid leave.
What they’re saying: “Fraud became an integral component of Tricolor’s business strategy. The resulting billion dollar collapse harmed banks, investors, employees and customers,” Manhattan U.S. attorney Jay Clayton said in a statement.
Why it matters: The Tricolor collapse continues to be a reminder that lender fraud doesn’t just hit Wall Street—it can disrupt approvals, floorplan relationships, and customer financing options when a major player collapses.
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Between the lines: The billion-dollar demise of Tricolor is already having an impact on the auto sector, with JP Morgan CEO Jamie Dimon saying that the bankruptcies at the subprime lender and auto supplier First Brands underscore how lax corporate lending practices had become over the past decade, per Reuters.
Some debt investors have moved to cut their exposure to certain sectors over concerns about weakness in consumer and auto lending.
JPMorgan wrote off $170 million in Q3 related to the Tricolor bankruptcy and indicated that it is reviewing its controls.
Looking ahead: "We've had a credit market bull market now for the better part of since 2010,” said Dimon. “These are early signs there might be some excess out there because of it. If we ever have a downturn, you're going to see quite a few more credit issues.”
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