By August 2025, top executives of auto lender Tricolor knew they were in trouble: The company had pledged approximately $2.2 billion of collateral to lenders and investors, but only had approximately $1.4 billion of real collateral, Manhattan federal prosecutors said on Wednesday.
Founder Daniel Chu and the company’s Chief Operating Officer David Goodgame, who were arrested and charged with bank fraud and wire fraud on Wednesday, planned to frighten at least one lender into a favorable deal, prosecutors allege. According to the indictment, the executives discussed telling a lender that the company might otherwise implode, much like the energy trading firm Enron in 2001, if a deal wasn’t reached. This would be bad for the lender because it would put them at risk of losing everything.
“Enron obviously has a nice ring to it, right?” Chu said when discussing with other Tricolor executives how to deal with one particular lender who had figured out the double-pledging issue.
“I mean, Enron, Enron raises the blood pressure of the lender when they see that. It, it has to, right?” Chu said while laughing, documents show.
It’s just one of several recorded conversations that emerged as part of a newly unsealed indictment against Chu and Goodgame. The indictment accused the men of orchestrating a years-long scheme to defraud banks and other private credit providers.
Chu is expected to be presented in a Florida court on Wednesday. Goodgame should be presented in a Texas court on Thursday. The men could not be immediately reached for comment.
Tricolor rocked the banking industry when it filed for Chapter 7 bankruptcy in September, leaving lenders like JPMorgan, Fifth Third Bank, and Jefferies exposed.
At the time of the company’s September 10 bankruptcy, its largest lenders were owed more than $900 million “as a result of the fraudulent double-pledging and collateral manipulation schemes” orchestrated by Chu and supported by Goodgame, the feds said.
But that didn’t stop Chu from using company money to enrich himself, according to prosecutors. They said Chu directed another executive to pay him the final installments of a $15 million bonus as the company approached bankruptcy, resulting in two payments from Tricolor totaling $6.25 million. Chu then used some of this money to purchase a multimillion-dollar property in Beverly Hills, California — weeks before Tricolor filed for Chapter 7, the feds said.
The back-to-back bankruptcies of Tricolor and auto parts company First Brands have raised questions about the health of the credit market, prompting JPMorgan’s CEO Jamie Dimon to tell investors that he has his “antenna” up.
“When you see one cockroach, there’s probably more,” Dimon said on the bank’s third-quarter earnings call with analysts.
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