His 'elaborate scheme' roiled credit markets. Now Tricolor CEO Daniel Chu is charged with fraud.

By Claudia Assis Chu allegedly spent millions to buy a Beverly Hills property just weeks before Tricolor Holdings filed for bankruptcy Tricolor Holdings' bankruptcy and fraud allegations contributed to millions in losses for JPMorgan Chase earlier this year. U.S. prosecutors on Wednesday charged Daniel Chu and other key executives at bankrupt subprime auto lender and used-car retailer Tricolor Holdings with what was described as "orchestrating a years-long financial crimes enterprise that defrauded multiple banks and other private credit providers." Chu, the founder and former CEO of privately held Tricolor Holdings, and the company's former chief operating officer, David Goodgame, were also charged with bank-fraud and wire-fraud offenses. Chu and Goodgame were arrested Wednesday, the indictment said. Chu allegedly was the leader of an "elaborate scheme" to defraud creditors, and at his direction, Tricolor repeatedly lied to banks and other credit providers, including by falsifying auto-loan data and "double pledging" collateral, the indictment said. "Fraud became an integral component of Tricolor's business strategy," the indictment said. Tricolor Holdings filed for bankruptcy in September, coming under a cloud of suspicion about its business practices and sparking fears of a domino effect on banks. JPMorgan Chase & Co. (JPM) disclosed in October that its loans to Tricolor contributed $170 million to losses booked during the third quarter on short-term loans to nonbank financial clients, such as auto-financing firms. That led CEO Jamie Dimon to utter a memorable sentiment: "When you see one cockroach, there are probably more." The prosecutors alleged that in August, just weeks before Tricolor placed more than 1,000 employees on unpaid leave of absence ahead of the bankruptcy filing, Chu received two payments from Tricolor totaling $6.25 million, and later that month used some of that money to purchase a "multimillion-dollar property" in Beverly Hills, Calif. In secretly recorded calls, Chu and other Tricolor executives tried to conceal the problems at Tricolor and even turned to artificial intelligence, seeking to blame the banks, according to the indictment. They also compared their situation with that of Enron, the energy-trading firm that collapsed into bankruptcy in 2001 following the discovery of accounting fraud and other misconduct, the indictment said. Tricolor's former chief financial officer Jerome Kollar and former finance executive Ameryn Seibold pled guilty on Tuesday "in connection with their participation in the conspiracy," the indictment said. Tricolor had about $1 billion in annual revenue in both 2023 and 2024, and when it filed for bankruptcy, it had more than 60,000 outstanding car loans, the indictment said. The problems at Tricolor spilled over in the fall to online used-car retailer Carvana (CVNA), which notched losses of 19% in October, its worst month of 2025. Shares of Carvana on Wednesday were down less than 1%, in keeping with losses for the broader equity indexes, but the stock has gained more than 120% this year. -Claudia Assis This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires 12-17-25 1140ET