Tricolor's Founder Extracted Millions While Orchestrating Massive Fraud Scheme, Feds Reveal

Federal prosecutors have unveiled a stunning case of corporate self-enrichment amid systemic deception. Daniel Chu, founder and CEO of subprime auto lender Tricolor, allegedly directed the creation of approximately $800 million in fraudulent collateral while simultaneously securing personal bonuses totaling $6.25 million in August—just weeks before the company imploded into bankruptcy.

The Fraud Architecture

According to an unsealed federal indictment, Chu’s scheme operated across roughly seven years through 2025, involving two key manipulation tactics. Employees were instructed to double-pledge identical assets across multiple loan facilities, creating phantom collateral out of thin air. Simultaneously, staff manually altered loan records to misrepresent delinquent accounts as eligible for securitization, prosecutors alleged.

The scale of deception was staggering: over $800 million in false collateral was fabricated under Chu’s direction, enabling Tricolor to secure funding under false pretenses.

Timing That Betrays Intent

The indictment paints a damning timeline. On August 19 and 20, Chu instructed Chief Financial Officer Jerome Kollar to wire the final two installments of his $15 million annual compensation package. The founder then deployed part of these funds to purchase a multi-million-dollar property in Beverly Hills, California, later that same month.

Within days of those transfers, Tricolor placed over 1,000 employees on unpaid leave. By September 10, the company had filed for Chapter 11 bankruptcy protection—marking a collapse that prosecutors argue was inevitable given the fraudulent foundation upon which it was built.

Caught in Secret Recordings

Prosecutors referenced secretly recorded conversations from August in which Chu, his CFO, and chief operating officer discussed strategies to deflect creditor scrutiny. The founder was acutely aware of his company’s deteriorating position, even describing it in his own words as “basically history.”

When lenders questioned inconsistencies in pledged collateral, Chu proposed fabricating a connection to a Trump administration loan deferment program to explain the discrepancies. Later, he considered an alternative gambit: blaming the banks themselves for overlooking red flags, with the goal of extracting a settlement payment.

In a moment of apparent candor, Chu invoked the specter of corporate scandal, noting that Enron—the energy company that collapsed following its 2001 accounting fraud exposure—“raises the blood pressure of the lender when they see that.”

Banking Industry Exposure

While the indictment did not identify all affected financial institutions, JPMorgan Chase, Barclays, and Fifth Third Bank have each disclosed material charges connected to Tricolor’s default. The lender’s sudden failure has intensified scrutiny on risk assessment practices across the U.S. banking sector, as regulators grapple with a series of defaults throughout the fall that have exposed systemic vulnerabilities in lending oversight.

Chu’s legal representatives have not responded to requests for comment regarding the allegations.