Daniel Chu, the founder and former CEO of Tricolor Holdings LLC, built the Dallas-based company into one of the largest subprime auto lenders and used-car retailers in the United States, operating roughly 60 to 65 dealerships across Texas, California, Nevada, and Arizona and specializing in loans to low-credit and no-credit buyers, often Hispanic immigrants without Social Security numbers or credit histories. At its peak Tricolor employed more than 1,500 people, generated roughly $1 billion in annual revenue, and held over 60,000 outstanding car loans. To fund that lending machine, Tricolor borrowed short-term money from banks and investment firms, then bundled the loans it made and sold them to investors through asset-backed securities offerings. According to the SEC, from at least 2020 through Tricolor’s bankruptcy in September 2025, Chu, former CFO Jerome Kollar, and former Senior Director of Finance Ameryn Seibold ran a multi-year scheme to defraud investors by double-pledging hundreds of millions of dollars of subprime auto loans to multiple asset-backed securities offerings and lenders at the same time. On August 18, 2026, the SEC charged all three in the Southern District of New York.
The SEC’s complaint alleges that Tricolor raised more than $1.9 billion through ABS offerings while Chu and Kollar made numerous false and misleading representations about the lender’s financial health, portraying the company as sound despite knowing it faced significant liquidity constraints and was struggling to fund its operations. The complaint charges all three with violating the antifraud provisions of the Securities Act and Exchange Act, charges Chu with control person liability, and seeks injunctions, disgorgement with prejudgment interest, civil penalties, and officer and director bars against Chu and Kollar. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against all three in December 2025.
The Same Loans Pledged to Multiple Lenders at Once
The central fraud was double-pledging. When a lender uses loans as collateral for financing, those loans are supposed to back that financing and no other, so that if the borrower defaults, the lender can claim the collateral free of competing claims. Tricolor, according to the SEC and federal prosecutors, repeatedly pledged the same auto loans to multiple lenders and multiple ABS offerings simultaneously, allowing the company to borrow against the same assets over and over. In offering materials and meetings, Tricolor represented that the loans included in the ABS collateral pools were free and clear of any other liens, when the defendants knew that many had been or would soon be double-pledged. By mid-2025, according to the criminal case, Tricolor had pledged roughly $2.2 billion in collateral while holding only about $1.4 billion in actual assets, leaving hundreds of millions of dollars of borrowing unsupported by any real collateral. The same car loan cannot honestly secure two different lenders’ money, and Tricolor, prosecutors said, made that dishonesty a routine manner of business.
The second layer of the scheme involved manipulating the loans themselves. The defendants deceived underwriters and investors by manipulating various loan metrics to make non-paying or defaulted loans appear current, and therefore eligible for inclusion in the securitization pools. Loans that were delinquent or charged off do not qualify as collateral for an ABS offering, because their non-performance is exactly the risk investors are trying to avoid. By manipulating the data to make bad loans look current, and in some cases fabricating records including fake customer payments, Tricolor smuggled ineligible loans into the pools it sold to investors. The combination of double-pledging good loans and disguising bad ones meant the collateral backing Tricolor’s $1.9 billion in ABS offerings was, in substantial part, either already claimed by someone else or not performing at all.
$945 Million Still Owed and Multi-Hundred-Million Losses at JPMorgan, Barclays, and Fifth Third
When Tricolor filed for Chapter 7 liquidation on September 10, 2025, the scale of the damage became clear. According to the SEC, more than $945 million of principal associated with the ABS offerings remained outstanding and payable to investors at the time of the bankruptcy. The company listed between $1 billion and $10 billion in assets and liabilities and more than 25,000 creditors. Major financial institutions absorbed the losses: JPMorgan Chase disclosed a loss of approximately $170 million, Fifth Third Bank took a roughly $200 million loss on loans to Tricolor, and Barclays was also among the lenders left exposed. A court-appointed trustee in the bankruptcy described the situation to the court as a pervasive fraud of extraordinary proportion. The collapse was severe enough to send ripples through the banking sector and prompt JPMorgan CEO Jamie Dimon to publicly question whether similar problems existed elsewhere in subprime lending. The asset-backed securities market depends on the accuracy of representations about the underlying collateral, which is precisely what the SEC alleges Tricolor falsified.
A $6.25M Bonus Extracted as the Company Collapsed
The conduct that has drawn particular attention involves what Chu allegedly did as the scheme unraveled. According to the criminal case, the fraud was exposed in late August 2025 when lenders confronted Chu and other executives about discrepancies in Tricolor’s collateral. Chu and others initially tried to conceal the problem, claiming the collateral issues were the result of an administrative error or software problems, and discussing among themselves how to explain the discrepancies to lenders, including by creating misleading narratives about loan deferments. After those concealment efforts failed, Chu directed a deputy to send him approximately $6.25 million in bonuses in August, extracting millions from the company in its final weeks even as it careened toward a bankruptcy that would leave lenders, investors, employees, and customers with enormous losses. Two former senior executives, including CFO Jerome Kollar, have pleaded guilty in the criminal case and are cooperating with authorities. Chu, 62, of Miami, was arrested in Florida and has pleaded not guilty.
A Financial Inclusion Story That Became a Financial Crimes Enterprise
Tricolor marketed itself through a narrative of financial inclusion, positioning itself as a lender serving immigrant and low-income communities that traditional banks would not touch. That narrative attracted investor appetite for high-yield debt and lent the company a socially positive framing. U.S. Attorney Jay Clayton, announcing the criminal indictment, said that at Chu’s direction Tricolor repeatedly lied to banks and other credit providers, and that fraud became an integral component of Tricolor’s business strategy. The collapse harmed not only the sophisticated banks and ABS investors who lost hundreds of millions, but also the car-buying customers who depended on a lender serving people with troubled credit histories, and the more than 1,500 employees who lost their jobs when 60 dealerships shut down with little warning. The SEC’s investigation remains ongoing. The story of Tricolor’s rapid rise and sudden collapse is, according to prosecutors, explained by the same fact: the fraud that fueled the growth was the fraud that caused the fall.
Conclusion
Daniel Chu built Tricolor into one of the largest subprime auto lenders in the country by borrowing against the car loans it made and selling them to investors. According to the SEC and federal prosecutors, he and two finance executives pledged the same loans to multiple lenders at once, faked customer payments to make defaulted loans look current, and raised $1.9 billion on collateral pools they knew were misrepresented. By mid-2025 the company had pledged $2.2 billion in collateral against $1.4 billion in real assets. When it collapsed in September 2025, more than $945 million was still owed to ABS investors, and JPMorgan, Barclays, and Fifth Third absorbed hundreds of millions in losses. As the scheme fell apart, Chu took a $6.25 million bonus. His CFO has pleaded guilty and is cooperating. Chu has pleaded not guilty. The same loan cannot honestly back two lenders. Tricolor, prosecutors say, made it a routine manner of business.
