Senior executives at the now-bankrupt subprime auto lender Tricolor Holdings have been hit with federal fraud charges, following an alleged years-long scheme that prosecutors say culminated in a billion-dollar collapse.
The Core of the Allegations
According to an indictment unsealed in a Manhattan federal court on Wednesday, the company's founder and former chief executive, Daniel Chu, stands accused of orchestrating a systematic fraud. Prosecutors allege that, since 2018, Chu directed multiple executives to deceive investors and lending institutions.
"As alleged in the indictment, CEO Daniel Chu was the leader of an elaborate scheme to defraud creditors of Tricolor," stated US attorney Jay Clayton. He claimed that fraud became an integral component of Tricolor's business strategy, with the company repeatedly lying to banks by falsifying auto-loan data and 'double pledging' collateral.
Unravelling of the Scheme and Bankruptcy
The indictment details how the alleged fraud began to unravel in the summer of 2025, when lenders confronted Chu and other executives about the company's collateral. In a series of secretly recorded phone calls, Chu is said to have "concocted plans to conceal or explain away the fraud."
When these efforts failed, the document alleges Chu extracted more than $6 million from the struggling company. The indictment claims he used a portion of these funds, specifically two payments totalling $6.25 million, to purchase a multi-million dollar property in Beverly Hills, California.
Shortly after, in September 2025, Tricolor Holdings filed for Chapter 7 bankruptcy. The filing revealed the company owed over $900 million to its largest lenders, a situation prosecutors directly attribute to the fraudulent activities.
Wider Repercussions and Fallout
The collapse of Tricolor, and the subsequent fraud charges, have intensified scrutiny on the private credit sector and its role in the global economy. Prosecutors emphasised the broad impact of the alleged crimes, stating "The resulting billion-dollar collapse harmed banks, investors, employees and customers."
A lawyer representing Daniel Chu did not immediately return a request for comment on the charges. The case continues to develop as federal authorities pursue the allegations of a complex, long-running financial deception at the heart of a major subprime auto lender.
