Defense and Compliance Attorneys
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The founder and CEO of bankrupt subprime auto lender Tricolor Holdings is Daniel Chu, and he has been charged with fraud by federal prosecutors in New York.
Who was charged
Federal authorities unsealed an indictment in Manhattan federal court charging Daniel Chu, Tricolor’s founder and chief executive officer, with directing multiple executives since 2018 to defraud investors and lending institutions through various schemes. The indictment describes Chu as the architect of a “systematic” or “massive” fraud that ultimately led to Tricolor’s collapse and bankruptcy.
Nature of the alleged fraud
Prosecutors allege that Chu and other executives falsified auto-loan data, fabricated records, and “double pledged” the same loan collateral to multiple lenders, allowing Tricolor to borrow repeatedly against the same assets. The indictment also says that, after the fraud began to come to light in late summer, Chu tried to conceal it by blaming administrative errors and then withdrew more than $6 million from the company when those efforts failed.
Bankruptcy and scale of losses
Tricolor filed for Chapter 7 bankruptcy on September 10, reporting more than $900 million owed to its largest lenders and more than $1 billion in assets at the time of filing. Major banks and other credit providers that had extended financing backed by Tricolor’s auto loans suffered substantial losses as a result of the alleged scheme.
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