Top executives at subprime auto lender charged with fraud. Here’s how prosecutors say they misled banks to earn billions

For years, Tricolor Holdings marketed itself arsenic a solution for car buyers unopen retired of accepted car loans. The institution specialized successful selling utilized vehicles to borrowers with mediocre oregon constricted credit, chiefly crossed the South and Southwest, offering financing wherever banks often wouldn’t.

Behind that accelerated growth, prosecutors present allege (1), was a sweeping fraud that deceived banks and investors, and helped the institution rise billions earlier collapsing into bankruptcy.

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Federal prosecutors accidental the strategy began astir 2018 and continued until Tricolor filed for bankruptcy successful September 2025. An indictment successful Manhattan charged laminitis and CEO Daniel Chu and main operating serviceman David Goodgame with orchestrating what prosecutors called a years long, “systematic fraud.”

“Fraud became an integral constituent of Tricolor’s concern strategy,” U.S. Attorney Jay Clayton said. “The resulting billion-dollar illness harmed banks, investors, employees and customers. It besides undermines assurance successful our fiscal system.”

The authorities says Tricolor executives repeatedly misrepresented the prime and worth of the company’s car loans, which were utilized arsenic collateral to unafraid funding. One maneuver allegedly progressive “double-pledging” the aforesaid loans to aggregate lenders astatine the aforesaid time, efficaciously utilizing identical collateral to backmost antithetic borrowing arrangements.

Prosecutors besides allege that indebtedness information was manipulated truthful that delinquent oregon charged-off loans appeared eligible for financing. By making risky loans look healthier than they were, Tricolor was capable to person banks and investors that its indebtedness portfolio was stronger and much diversified than reality.

Those misrepresentations, prosecutors say, allowed Tricolor to get billions of dollars from lenders and investors. At the clip of its bankruptcy filing, the institution claimed it had much than $1 cardinal successful assets.

The fallout didn’t halt with Tricolor. Banks including JPMorgan and Jefferies Financial Group had extended hundreds of millions of dollars successful financing to Tricolor and to car parts shaper First Brands, which failed successful the aforesaid month. The duplicate bankruptcies rattled Wall Street and concisely sent shares of respective determination banks sharply little amid fears that different risky loans mightiness beryllium lurking connected equilibrium sheets.