Tricolor executives charged with 'systematic fraud' after subprime auto lender roiled banking sector
Published Wed, Dec 17 2025
8:07 AM EST
Updated Moments Ago
Yun Li@YunLi626WATCH LIVEKey Points
- Prosecutors charged top executives of the bankrupt subprime with what they called a years-long, "systematic fraud" scheme.
- Bankruptcies at Tricolor Holdings and auto parts make First Brands sent shockwaves through the banking sector earlier this year.
- JPMorgan CEO Jamie Dimon said the bankruptcies were signs that corporate lending practices had grown too lax over the past decade.
A Tricolor dealership in Mesa, Arizona, US, on Wednesday, Sept. 24, 2025.
Mark Felix | Bloomberg | Getty Images
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, founder and CEO Daniel Chu and chief operating officer David Goodgame orchestrated a series of fraudulent schemes that let Tricolor obtain billions of dollars from lenders and investors by misrepresenting the value of its loan collateral.Tricolor sold used cars to customers with limited or poor credit in the south and southwest, and told the court they had more than $1 billion in assets at the time of it declared bankruptcy in September.
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 that delinquent or charged-off loans appeared eligible for financing, the indictment said.
Banks including JPMorgan and Jefferies Financial Group had lent hundreds of millions of dollars to Tricolor and auto parts maker First Brands by the time they failed, both in the same month, fueling concern on Wall Street that stresses in the private credit and leveraged lending markets might spread.
Jefferies and some regional banks briefly tumbled in mid-October on growing fears that more bad loans were lurking around the corner. One day, Utah's Zions Bancorporation dropped more than 13%, Arizona's Western Alliance Bancorp fell more than 10% and the SPDR S&P Regional Banking ETF (KRE) lost more than 6%.
The same month, JPMorgan CEO Jamie Dimon said that the bankruptcies at Tricolor and First Brandswere signs that corporate lending practices had grown too lax over the past decade.
"When you see one cockroach, there are probably more," Dimon said in a conference call. "Everyone should be forewarned on this one."