By Jacob Adelman
Daniel Chu, the chief executive of bankrupt car-dealership chain Tricolor Holdings, has been charged in an alleged scheme to defraud banks and other investors by manipulating the collateral they held against loans to his business.
Chu was accused of supervising a conspiracy that involved double-pledging the same collateral to multiple investors and misrepresenting the value of assets backing loans to the company.
Tricolor chief operating officer, David Goodgame, was also charged in the indictment, released Wednesday by the U.S. Attorney's Office for New York's Southern District.
"Over time, this series of fraudulent schemes had a profound effect on Tricolor, which obtained hundreds of millions of dollars in cash advances," U.S. Attorney Jay Clayton wrote in the indictment.
Attorneys for Chu and Goodgame didn't respond to requests from Barron's for a response to the allegations.
Dallas-based Tricolor Holdings filed for Chapter 7 bankruptcy protection in September, days after abruptly closing its 65 lots across six states.
Lenders including JPMorgan Chase, Barclays, and Fifth Third have warned investors of potentially hundreds of millions in losses from their exposure to Tricolor. The banks either didn't respond to requests for comment about the indictment or declined to comment.
Clayton wrote in Wednesday's indictment that Tricolor's lenders "provided over a billion dollars in funding based on Tricolor's fabricated data and false statements."
In 2022, Barron's found Tricolor was selling cars well above market averages while touting its designation from the U.S. Treasury as a Community Development Financial Institution.
Tricolor had earned the CDFI designation, which serves as a government social-lending seal of approval, based on its focus on Spanish-speaking immigrant car buyers, to which it extended in-house subprime loans.
Tricolor was also repeatedly cited by state motor-vehicle and financial regulators, Barron's found, for lapses that included delayed title transfers, improper use of temporary license plates, and selling cars for which the company didn't hold title.
Barron's later reported on allegations of financial mismanagement and self-dealing in Chu's record before his success in securing lines of credit from major banks.
In the federal indictment, Chu is accused of having the same car-loan revenue streams pledged to multiple lenders as collateral.
He and Goodgame are also alleged to have tampered with collateral descriptions in records to mislead lenders about the performance of its auto loans. In one case, they altered records of loans charged off as losses to make the loans appear to collateral holders that they were still generating returns, according to prosecutors.
Anne Burns, the trustee in Tricolor's bankruptcy case, said in a court submission last week that she intends to file a lawsuit against Chu alleging that he sat "firmly at the center of the fraud that led to Tricolor's sudden collapse and caused hundreds of millions (if not billions) of dollars in losses."
The Securities and Exchange Commission has also opened an investigation into Tricolor, Burns said in her filing. An SEC spokesperson said the agency doesn't comment on the existence or nonexistence of a possible investigation.
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(END) Dow Jones Newswires
December 17, 2025 13:02 ET (18:02 GMT)
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