NEW YORK — U.S. prosecutors have charged top executives of bankrupt subprime auto lender Tricolor Holdings with what authorities described as a years-long scheme of “systematic fraud” that helped the company raise billions of dollars and rattled the banking sector earlier this year.
In an indictment unsealed in Manhattan, prosecutors alleged that from at least 2018 through September 2025, Tricolor founder and Chief Executive Officer Daniel Chu and Chief Operating Officer David Goodgame orchestrated multiple fraudulent schemes to misrepresent the value of the company’s loan collateral. The alleged misconduct allowed Tricolor to obtain financing from lenders and investors under false pretenses, prosecutors said.
Tricolor specialized in selling used vehicles to customers with limited or poor credit, primarily in the South and Southwest. At the time it filed for bankruptcy in September, the company reported more than $1 billion in assets, according to court filings.
Overlapping Pledges
Prosecutors said Tricolor executives repeatedly pledged the same auto loans to multiple lenders at the same time, a practice known as double pledging, and manipulated loan data so that delinquent or charged-off loans appeared eligible for financing.
Several major financial institutions were exposed. Banks including JPMorgan Chase and Jefferies Financial Group had extended hundreds of millions of dollars in loans to Tricolor and to auto parts maker First Brands, which also collapsed in September. The near-simultaneous failures raised fears on Wall Street that problems in private credit and leveraged lending could spread more broadly.
‘When You See One Cockroach…’
Those concerns briefly weighed on bank stocks in mid-October. Shares of Utah-based Zions Bancorporation fell more than 13% in a single day, while Arizona’s Western Alliance Bancorp dropped more than 10%, analysts noted. The SPDR S&P Regional Banking ETF declined more than 6%.
The same month, JPMorgan CEO Jamie Dimon warned that the bankruptcies were a sign corporate lending standards had loosened excessively over the past decade.
“When you see one cockroach, there are probably more,” Dimon said during a conference call. “Everyone should be forewarned on this one.”
