Former executives of bankrupt used car dealer Tricolor indicted

Federal prosecutors announced the indictments Wednesday of four former executives at bankrupt subprime auto dealer Tricolor, alleging they engaged in a multi-year “systemic fraud” scheme.

Tricolor founder Daniel Chu, former chief operating officer David Goodgame and former executives Jerome Kollar and Ameryn Seibold were charged in what the U.S. Attorney’s Office for the Southern District of New York claimed was “a series of frauds directed at each of Tricolor’s lenders.”

“At Chu’s direction, multiple Tricolor executives repeatedly defrauded lenders using various fraudulent schemes including ‘double-pledging’ collateral – pledging assets to support one loan and then pledging the same assets to another lender to support another loan,” prosecutors allege in a filing.

The bankruptcy of Tricolor rocked the banking and credit industries, after it was seen as a potential sign of overall weakness in the banking system.

Some of the largest banks in the world were hit with losses from the Tricolor bankruptcy, including JPMorgan Chase, Barclays and Fifth Third.

Founded in 2007, Tricolor sold used cars to customers with limited or poor credit across several U.S. states.

It grew to become “the third-largest used auto retailer in Texas and California, operating approximately 65 retail centers in Texas, California, Nevada, Arizona, New Mexico, and Illinois,” the Justice Department said in a filing.

“At its peak, Tricolor employed over 1,500 people and generated approximately $1 billion in annual revenue in both 2023 and 2024,” wrote prosecutors.

When the company went bankrupt, it still had “over 60,000 outstanding car loans,” the government alleged. Tricolor told a court in a bankruptcy filing that it had over $1 billion in assets when it went under.

Tricolor’s alleged fraud began to unravel in August, after lenders learned the company had not completed an audit that had begun in February. The DOJ’s filing says multiple lenders “expressed concerns” about the unfinished audit.

At that point, the Justice Department alleges, Chu, “proposed various lies the conspirators could tell to resolve the audit.”

A one-time spokesperson for the company did not reply to a request for comment, and an email to the company’s address was not returned.

On Wednesday, Tricolor’s website said the company was “no longer offering financing or sales services,’ but that existing customers should “continue making your payments as usual.”