(CNN) — The $1.9 billion collapse of subprime auto lender Tricolor last year was fueled by a multiyear fraud involving its executives, the Securities and Exchange Commission alleged in charges announced Tuesday.
Texas-based Tricolor, which went bankrupt in September 2025, specialized in loans and car sales to buyers without Social Security numbers or credit histories. From at least 2020 through its bankruptcy, the auto lender raised nearly $2 billion while its top executives misled investors about the health of the business, the SEC alleged.
The executives, including former CEO Daniel Chu, portrayed the company as sound while knowing it faced severe liquidity constraints and struggled to fund its operations, the SEC claimed.
“We allege that these defendants defrauded investors based on bogus collateral and violated the integrity of our private credit markets,” said David Woodcock, director of the SEC’s Division of Enforcement, in a press release.
This is the second time Tricolor has been accused of fraud.
Two months after the company declared bankruptcy, the US attorney for the Southern District of New York unsealed an indictment that said Chu and other executives “repeatedly defrauded lenders.” This included “double-pledging collateral,” or pledging the same assets to multiple lenders at the same time, according to the indictment.
The indictment also claimed that Chu directed another company executive, Jerome Kollar, to pay him $6.25 million in bonuses as the company collapsed last summer. He allegedly used some of the money to purchase a multimillion-dollar property in Beverly Hills, California.
Weeks later, Tricolor placed more than 1,000 employees on unpaid leaves of absence and filed for bankruptcy, according to the indictment.
Kollar pleaded guilty to the fraud charges and cooperated with the investigation.
The SEC also filed its complaint in the Southern District of New York and seeks to force Chu and other former Tricolor executives to repay their allegedly ill-gotten profits plus interest, among other penalties.
Last year, JPMorgan Chase said it would take a $170 million hit from its dealings with Tricolor. And in October, JPMorgan CEO Jamie Dimon told analysts that Tricolor’s bankruptcy set his “antenna” up.
“I probably shouldn’t say this, but when you see one cockroach, there are probably more … Everyone should be forewarned on this,” he added.
CNN’s Chris Isidore contributed reporting.
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