Tricolor Founder Chu Charged With Alleged Fraud, DOJ Says (3)

US prosecutors charged the founder of bankrupt subprime auto lender Tricolor Holdings with conspiring to defraud lenders and investors, in a sweeping indictment of the leadership of a used car dealer and financing company that collapsed in a wave of scandal in September.

The indictment accuses Daniel Chu and other executives who had worked at Tricolor of operating the company through “systemic fraud.” Tricolor filed for bankruptcy in September after shutting down more than 60 locations across the US Southwest.

Prosecutors said, at Chu’s direction, executives repeatedly defrauded lenders through various schemes including “double-pledging” auto loan collateral and manipulating descriptions of the loans. They also said Tricolor classified assets pledged for collateral to make “near-worthless” assets appear to meet lenders’ requirements.

Read More: Tricolor’s Frantic Final Days Began With a Call From JPMorgan

The newly unsealed charges provide the most detailed account yet of misconduct that lenders, investigators, and bankruptcy officials had been trying to untangle since Tricolor’s collapse. Bloomberg reported earlier this year that federal prosecutors had begun examining whether the company had misled banks and double-pledged collateral across warehouse credit lines. Lenders including JPMorgan Chase & Co., Barclays PLC, and Fifth Third Bancorp. have been preparing for significant losses tied to the company’s facilities.

“Tricolor defrauded multiple lenders, they told multiple lies and most disturbingly the direction to do it came from the top,” Manhattan US Attorney Jay Clayton said in a press conference Wednesday morning.

Chu, 62, and David Goodgame, 49, the company’s former chief operating officer, are charged with multiple counts including operating a continuing financial crimes enterprise, which carries a minimum of 10 years in prison. Federal prosecutors also unsealed charges against other former company officials including Jerome Kollar, and Ameryn Seibold.

Kollar, 62, and Seibold, 31, a former finance executive, both pleaded guilty Tuesday to fraud charges in federal court in Manhattan and are cooperating with the government. Chu is expected to be appear in federal court in Florida later today, while Goodgame is scheduled to appear Thursday in Texas.

Guilty Pleas

Chu, Kollar and Goodgame didn’t immediately respond to requests for comment. Seibold couldn’t immediately be reached.

According to the charging document, Tricolor “maintained inflated borrowing base data and repeatedly double-pledged the same collateral to multiple lenders, causing the lenders to advance funds Tricolor was not entitled to.”

Prosecutors outlined a pattern in which loans that were delinquent, charged off, or previously sold were allegedly still reported as eligible collateral. By September 2025, Tricolor had pledged about $2.2 billion in assets to lenders, although internal records showed only about $1.4 billion in real collateral.

The case has drawn focus from banks and bondholders across the asset-backed securities market, which depends on accurate loan-level reporting to evaluate risk. Tricolor had marketed itself as a data-driven lender with sophisticated underwriting and analytics, positioning its loan book as a prime candidate for securitization.

Chu founded the company in 2007 after a series of other auto lending ventures, and over time the Texas-based lender grew into one of the country’s top lenders focused on making loans to undocumented immigrants, many of them from Mexico.

Publicly Chu positioned the company as a socially responsible lender providing credit to borrowers ignored by mainstream financial lenders, and often touted its certification from the Treasury Department as a Community Development Financial Institution. Lending to the Hispanic market, Chu said in a 2019 podcast, “truly was a purpose to providing a better product and a better service.”

Tricolor went on to become a darling of Wall Street, selling investors some $2.7 billion of securities backed by auto loans, working closely with major banks including JPMorgan, and drawing a sizable investment from BlackRock Inc. By 2022, Tricolor was floating a valuation of around $1 billion to potential investors, Bloomberg previously reported.

‘Means of Survival’

The fraud allegedly consisted of two primary mechanisms. Chu, Goodgame and their conspirators would first pledge the same auto loans to lenders twice, and they would manipulate loan data to make ineligible, delinquent auto loans appear to be current and compliant with lender requirements. In addition, the indictment says, the conspirators fabricated backup records such as fake customer payments.

“Under Chu’s leadership, this activity became Tricolor’s routine manner of business and eventually Tricolor’s means of survival,” prosecutors said.

For example, in or about 2018 prosecutors said that Tricolor was facing liquidity pressure and that Chu allegedly told Kollar to use delinquent loans to obtain credit from one of Tricolor’s unnamed financial lenders, which it describes only as “Lender 1.” The loans were so past due that Tricolor itself had charged them off as losses, but Chu told Kollar to create a fictitious portfolio company in Tricolor’s dealer management system to make the loans appear to be performing loans, the indictment said.

Chu and his co-conspirators fraudulently pledged charged-off loans to Lender 1 “for years” until Tricolor collapsed, the indictment said. By at least 2021, the manipulation expanded beyond Lender 1, it said.

While the indictment doesn’t reveal who Lender 1 is, it mentions that Chu served on that firm’s board of directors at the same time the fraud was ongoing. Chu resigned from the board of directors of Origin Bank after being appointed in 2022.

Origin Bank didn’t respond to a request to comment.

By August 2025 the alleged fraud began to unravel, after one of Tricolor’s lenders noticed discrepancies in the data supplied by the lender: loans that Tricolor reported as being current didn’t show a corresponding reduction in the outstanding principal. Bloomberg previously reported that it was a junior analyst at asset manager Waterfall that first detected issues with loan data, prompting JPMorgan’s bankers to track Chu down in Italy.

Tricolor executives had a series of calls, some of which were secretly recorded by at least one of the participants, the indictment said.

‘Nice Ring’

In an Aug. 30 call, Chu and others discussed finding a way to blame the banks for ignoring red flags of their frauds and using that as leverage to reach a favorable settlement with one lender — Lender 4 — which had already terminated its lending facility to Tricolor, the indictment said, without identifying the lender. One possibility was to raise comparisons to Enron, the energy company that collapsed after accounting fraud and other misconduct was uncovered.

“Enron obviously has a nice ring to it, right?” Chu said on the call, the indictment says.

As the alleged fraud was beginning to fall apart and the company faced insolvency, the indictment alleges, Chu sought to enrich himself by directing Kollar, the chief financial officer, to pay him the final installments of his $15 million bonus. Three weeks before the company filed for bankruptcy Chu received a pair of payments from the company totaling $6.25 million, some of which he used to purchase a multi-million dollar property in Beverly Hills, the indictment says.

The case is US v Chu, 25-cr-579, US District Court, Southern District of New York.

(Adds background from indictment. A previous version corrected details of the penalty associated with the charges.)

--With assistance from Bob Van Voris, Dorothy Ma and Isabella Farr.

To contact the reporters on this story:
Chris Dolmetsch in Federal Court in Manhattan at cdolmetsch@bloomberg.net;
Myles Miller in New York at mmiller899@bloomberg.net;
Scott Carpenter in New York at scarpenter60@bloomberg.net

To contact the editors responsible for this story:
Ben Bain at bbain2@bloomberg.net

Anthony Aarons, Dan Wilchins

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