Federal prosecutors have charged the founder of Irving-based Tricolor Holdings with orchestrating a years-long scheme that allegedly defrauded major lenders of nearly $1 billion, marking a dramatic collapse for a company once positioned as a key provider of auto loans to borrowers with poor credit histories. Authorities announced the charges Wednesday alongside the arrests of two former top executives and guilty pleas from two others.
According to an indictment unsealed in federal court in Manhattan, Daniel Chu, Tricolor’s founder and chief executive, directed senior executives beginning in 2018 to mislead investors and lending institutions through fabricated data and false financial statements. Prosecutors allege that the fraudulent conduct was not isolated, but instead became embedded in the company’s core business practices as it sought continued access to credit.
Chu, 62, a resident of Miami, was arrested in Florida. David Goodgame, 49, Tricolor’s former chief operating officer, was arrested in Texas. Court records did not immediately indicate legal representation for Goodgame at his initial appearance, while Chu’s defense counsel did not respond to requests for comment.
U.S. Attorney Jay Clayton said Chu repeatedly deceived banks and other financial partners, turning misrepresentation into a routine method for sustaining Tricolor’s operations. Clayton emphasized that the company’s downfall extended beyond investors, affecting customers who relied on subprime auto financing to purchase vehicles.
Prosecutors said the alleged misconduct came to light in late August, when lenders confronted Tricolor executives over discrepancies tied to the company’s loan collateral. Initially, Chu and others attempted to dismiss the concerns as administrative errors, according to the indictment. When those explanations failed, authorities allege Chu withdrew more than $6 million from the company, including funds used to purchase a multimillion-dollar property in Beverly Hills.
On Sept. 10, Tricolor filed for Chapter 7 bankruptcy protection, reporting debts exceeding $900 million owed to its largest lenders. The filing effectively ended the company’s operations and triggered broader concerns about the stability of subprime auto lending markets.
Chu faces multiple federal charges, including conspiracy, bank fraud and wire fraud. The most serious count accuses him of running a continuing financial crimes enterprise, a charge that carries a mandatory minimum sentence of 10 years in prison and a potential maximum of life imprisonment if convicted. Goodgame faces charges of conspiracy, bank fraud and wire fraud.
Authorities also revealed that Tricolor’s former chief financial officer and a former finance executive pleaded guilty earlier this week in Manhattan federal court. Both individuals are cooperating with investigators as the case continues.
The prosecution underscores an intensified federal focus on corporate fraud in consumer finance, particularly in sectors serving vulnerable borrowers. Officials said the alleged deception has made lenders more cautious, potentially restricting access to auto loans for consumers with limited credit options, even as the legal proceedings against Tricolor’s former leadership move forward.
