Tricolor execs charged with 'systematic fraud' after subprime auto lender roiled banking sector
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U.S. prosecutors charged top executives of bankrupt subprime auto lender Tricolor Holdings with what they described as a years-long, "systematic fraud" scheme that sent shockwaves through the banking sector earlier this year.In an indictment unsealed in Manhattan, prosecutors allege that from at least 2018 through September 2025, Daniel Chu and David Goodgame orchestrated a series of fraudulent schemes that allowed Tricolor to obtain billions of dollars from lenders and investors by misrepresenting the nature and value of its loan collateral.Tricolor sold used cars to customers with limited or poor credit in the south and southwestern U.S. and told the court they had over $1 billion in assets at the time of their bankruptcy.Tricolor executives repeatedly pledged the same auto loans to multiple lenders at the same time, or "double-pledged" assets to banks, and manipulated loan data so delinquent or charged-off loans appeared eligible for financing, the indictment said. The auto lender filed for bankruptcy in September with major banks including JPMorgan having lent hundreds of millions of dollars to the firm. The failure fueled debate on Wall Street over whether stresses in private credit and leveraged lending remain contained or could spread more broadly.JPMorgan CEO Jamie Dimon said the bankruptcies in the U.S. auto market are a sign that corporate lending standards grew too lax in the past decade-plus. "When you see one cockroach, there are probably more," Dimon said in a conference call in mid-October. "Everyone should be forewarned on this one."Got a confidential news tip? We want to hear from you.Sign up for free newsletters and get more CNBC delivered to your inboxGet this delivered to your inbox, and more info about our products and services.© 2025 Versant Media, LLC.
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