On September 11, 2025, vehicles adorned with Mexican and American flags stood at a Tricolor dealership in Houston, Texas—a stark reminder of the company's recent turmoil. Daniel Chu, the CEO and founder of the subprime auto firm, Tricolor, is accused by U.S. prosecutors of fraudulent activities leading to the company's demise.
According to a federal indictment unsealed on Wednesday, Chu instructed the company's Chief Financial Officer, Jerome Kollar, to issue the remaining $6.25 million of his $15 million annual bonus on August 19 and 20, as allegations of fraud surfaced.
Chu is accused of engaging in 'systemic fraud' over approximately seven years, up until 2025. The indictment claims he used some of the bonus money to purchase a 'multimillion-dollar property' in Beverly Hills, California, shortly after.
Soon after the bonus payments, Tricolor placed over 1,000 employees on unpaid leaves, and by September 10, the company filed for bankruptcy protection. Lawyers representing Chu have not yet commented on these allegations.
Prosecutors allege that, under Chu's direction, Tricolor created approximately $800 million in 'bogus collateral.' This was achieved by double-pledging the same assets for multiple loans and manually altering records to make delinquent loans appear as viable collateral.
The sudden collapse of Tricolor contributed to a wave of defaults unsettling the U.S. banking sector, highlighting previously underestimated risks within the American financial system.
The indictment claims that Chu, aware of his company's dire situation, admitted Tricolor was 'basically history.' Secretly recorded calls reportedly captured discussions between Chu and top executives exploring strategies to pacify worried lenders.
While the indictment does not specify the banks allegedly defrauded by Tricolor, JPMorgan Chase, Barclays, and Fifth Third Bank have reported charges linked to the borrower.
As lenders pressed Chu for clarifications on collateral issues, the CEO allegedly suggested using a lie about the data being connected to a Trump administration loan deferment program as a defense. He also considered shifting the blame onto the banks by highlighting their negligence as a strategy to negotiate a settlement.
In a comparison that raised eyebrows, Chu likened Tricolor's predicament to the infamous Enron scandal, saying, 'Enron obviously has a nice ring to it, right? I mean, Enron raises the blood pressure of the lender when they see that.'