How Tricolor's CEO Allegedly Orchestrated an $800 Million Fraud Before Filing for Bankruptcy

When financial schemes began to crumble, the CEO of subprime auto lender Tricolor took a striking approach: prosecutors say he made off with millions in bonuses while the company was secretly falling apart.

The Fraud Scheme Unraveled

According to a federal indictment, Daniel Chu, founder and CEO of Tricolor, orchestrated what prosecutors describe as “systemic fraud” spanning approximately seven years through 2025. The core scheme involved creating roughly $800 million in fictitious collateral by double-pledging identical assets across multiple loan agreements. Employees were reportedly instructed to manually manipulate records, making delinquent loans appear qualified to serve as collateral.

Bonus Extraction at the Moment of Collapse

In mid-August, as the fraudulent underpinnings became impossible to conceal, Chu instructed Chief Financial Officer Jerome Kollar to transfer the final two portions of his $15 million annual compensation package on August 19 and 20. The total payout: $6.25 million. Court filings indicate Chu immediately deployed portions of these funds to acquire a multi-million-dollar residential property in Beverly Hills, California.

Within days, Tricolor placed over 1,000 employees on unpaid leave. By September 10, the company had filed for bankruptcy protection.

From Deflection to Panic

Secret recordings obtained by prosecutors captured conversations in August among Chu, his CFO, and chief operating officer discussing tactics to forestall creditor action. According to the indictment, Chu considered fabricating a connection to a Trump administration loan relief program as cover for the manipulated data. When that approach proved insufficient, he pivoted to another strategy: threatening lenders by suggesting their negligence in identifying red flags could expose them to liability, potentially extracting a settlement to keep Tricolor operational.

In these recorded exchanges, Chu made a notable comparison. Drawing on the cautionary tale of Enron—the energy corporation that imploded in 2001 following disclosure of accounting fraud—Chu suggested that invoking the scandal’s name would “raise the blood pressure of the lender.” The parallel was deliberate: Tricolor’s executives appeared to view Enron’s notoriety as a pressure tactic rather than a cautionary precedent.

Systemic Financial Risk Emerges

The rapid failure of Tricolor was part of a cascade of defaults that shook U.S. banking in fall 2025, raising questions about undetected vulnerabilities within the American financial system. Major lending institutions including JPMorgan Chase, Barclays, and Fifth Third Bank disclosed losses attributable to the borrower. The extent of exposure across the banking sector suggests that Tricolor’s $800 million fraud may have had ripple effects far beyond a single company’s collapse.

The indictment remains unsealed, with prosecutors continuing their case against Chu. His legal representatives have not yet commented on the allegations.