Subprime Auto Lender CEO Charged for Double-Counting Collateral That Led to $1B Collapse

Core Viewpoint - Tricolor, a subprime auto lender, has been indicted for defrauding creditors through the double-counting of collateral, leading to significant financial losses and the company's eventual bankruptcy [1][2]. Group 1: Indictment and Fraud Scheme - Daniel Chu, CEO of Tricolor, and COO David Goodgame have been indicted for orchestrating a scheme that involved persistent falsehoods to lenders, contributing to losses exceeding $1 billion [2]. - The indictment alleges that fraudulent activities began in 2018, with the company repeatedly pledging the same collateral to multiple lenders [5][6]. - Tricolor's bankruptcy filing in early September revealed significant fraud in collateral records, with the company owing around $200 million to Fifth Third Bancorp [3]. Group 2: Financial Impact and Operations - At the time of its collapse, Tricolor operated 65 locations and managed over 60,000 outstanding car loans, generating approximately $1 billion in revenue in fiscal years 2023 and 2024 [4]. - The company had issued approximately $5 billion in auto loans and owed major lenders over $900 million at the time of its bankruptcy [9]. - The fallout from Tricolor's collapse has led to a sharp decline in regional bank stocks [9]. Group 3: Executive Actions and Consequences - Chu arranged for himself to receive a substantial $15 million bonus shortly before the bankruptcy, indicating awareness of the impending insolvency [7]. - The executives are accused of manipulating financial records and retaining sold vehicles on the borrowing base for creditors [7]. - Following the collapse, around 1,000 employees were dismissed, and the law firm handling the bankruptcy proceedings no longer represents the company [8].