$1 billion fraud revealed with guilty pleas from subprime auto lender Tricolor

The founder of Tricolor Holdings led other top executives of the subprime auto lender on a seven-year campaign to defraud its largest lenders out of nearly $1 billion, authorities said Wednesday, as they announced two arrests and guilty pleas by two former executives.

Daniel Chu, the company’s founder and chief executive, was charged in an indictment unsealed in Manhattan federal court with directing multiple executives since 2018 to defraud investors and lending institutions. The fraudulent schemes included fabricating data and making false statements, according to the indictment.

A defense lawyer for Chu did not immediately return a message seeking comment.

Chu, 62, of Miami, was arrested in Florida, while David Goodgame, 49, of Waxahachie, Texas, the company’s former chief operating officer, was arrested in Texas. It was not immediately clear who will represent Goodgame at an initial court appearance.

U.S. Attorney Jay Clayton told a news conference that Chu repeatedly lied to banks and other credit providers as he turned fraud “into an integral component of Tricolor’s business strategy.”

He said the collapse of the company dealt a blow to car-buying customers who needed the services of a lending business that catered to people with troubled credit histories.

“Of course, if you have something like this happen, if you have fraud in that area, it becomes harder for those people to get auto loans,” Clayton said.