Feds say Tricolor bosses ran a “systematic fraud” playbook — and it helped shake Wall Street

With input from CNBC, the Financial Times, and NBC News.

Federal prosecutors have charged top former executives at bankrupt subprime auto lender Tricolor Holdings, accusing them of running what the government calls a yearslong, “systematic fraud” operation that helped rattle banks and credit markets earlier this year.

In an indictment unsealed in Manhattan, prosecutors say Tricolor founder and CEO Daniel Chu and former COO David Goodgame orchestrated schemes from at least 2018 through September 2025 to pull in billions of dollars from lenders and investors by allegedly inflating or misrepresenting the value of the company’s loan collateral.

Tricolor specialized in selling used cars — largely in the South and Southwest — to customers with limited or poor credit. When it filed for bankruptcy in September, the company told the court it had more than $1 billion in assets.

But prosecutors say behind the scenes Tricolor executives were doing things lenders absolutely do not sign up for:

• “Double-pledging” collateral: allegedly pledging the same auto loans to multiple lenders at the same time.
• Data manipulation: allegedly tweaking loan data so delinquent or charged-off loans looked clean enough to qualify for financing.

Manhattan US Attorney Jay Clayton said the alleged fraud wasn’t a side hustle — it was baked into the model. In his words, prosecutors argue it became “an essential component” of how Tricolor operated, and that direction came from the very top.

Two other former employees, Jerome Kollar and Ameryn Seibold, have pleaded guilty to federal charges tied to the case, according to prosecutors.

Tricolor’s collapse — along with the bankruptcy of auto parts maker First Brands in the same month — sent a jolt through the banking sector and reignited worries that private credit and corporate lending had gotten sloppy.

Banks including JPMorgan and Jefferies had exposure, and the fear of more surprise blowups hit regional bank stocks hard for a stretch in October. Shares of Zions Bancorporation dropped more than 13% in one day, Western Alliance fell more than 10%, and the SPDR S&P Regional Banking ETF (KRE) sank more than 6%, according to the figures cited.

JPMorgan CEO Jamie Dimon pointed to the Tricolor and First Brands bankruptcies as warning lights that lending discipline has weakened over the last decade.

“When you see one cockroach, there are probably more,” Dimon said on a conference call. “Everyone should be forewarned on this one.”

A representative for Chu didn’t immediately respond to a request for comment, and Goodgame couldn’t be reached, according to the reporting included in your source material.

Prosecutors say the investigation is ongoing and are urging anyone with knowledge of the alleged scheme to come forward — meaning this may not be the last chapter in the Tricolor fallout.