Mexican and American flags are attached to a vehicle at a tricolor dealership in Houston, Texas, September 11, 2025.
Mark Felix | Bloomberg | Getty Images
The CEO of subprime car company Tricolor directed an aide to send him a $6.25 million bonus in August for uncovering a fraud scheme that propped up the company, U.S. prosecutors have alleged.
According to a federal indictment unsealed Wednesday, Tricolor founder and CEO Daniel Chu directed Chief Financial Officer Jerome Koller to send the final two payments of an annual $15 million bonus on Aug. 19 and 20.
Chu is accused of engaging in a “systematic fraud” over a period of about seven years, ending in 2025, and later that month used some of the funds to purchase “multi-million dollar real estate” in Beverly Hills, California, according to the filing.
Within days of Chu’s bonus being paid, Tricolor placed more than 1,000 employees on unpaid leave. The company filed for bankruptcy protection by September 10th.
A lawyer representing Mr. Chu did not immediately respond to an email seeking comment on the allegations.
According to the indictment, prosecutors say Tricolor, at Chu’s direction, created approximately $800 million in “false collateral” by double pledging the same assets into multiple loans and by having employees manually falsify records to make delinquent loans appear to qualify as collateral.
Tricolor’s sudden collapse was one in a series of defaults that roiled the U.S. banking industry this fall, raising concerns about undervalued risks in the U.S. financial system.
At the time of the bonus payments, Chu knew that the company was, in his own words, “basically a historic company,” according to the filing.
Prosecutors alleged that the founder “secretly recorded” an August phone call involving Mr. Chu and the company’s chief financial officer and chief operating officer, in which they discussed how to keep the company’s lenders at bay.
The indictment does not name the banks Tricolor allegedly defrauded, but JP Morgan Chase, barclays and The Fifth Third Bank The fees related to borrowers were clarified.
The indictment says that after Tricolor lenders confronted Chu with questions about the collateral they had posted on the loans, Chu suggested a lie that some of the manipulated data was connected to the Trump administration’s loan deferment program.
Prosecutors said he considered a different tactic, blaming banks for ignoring red flags as a way to extract a settlement and keep the company afloat.
At the time, Chu reportedly compared Tricolor to Enron, an energy company that went bankrupt in 2001 after accounting fraud was discovered.
“Enron obviously has a nice ring to it, right?” Chu said, according to the documents. “So Enron, Enron raises the blood pressure of the lenders when they see that.”
