SEC Says Tricolor Pledged the Same Auto Loans Twice, Leaving Investors $945 Million Short

The alleged scheme ran for five years and surfaced only when one lender’s analyst noticed that loans reported as current were not paying down.

August 20, 2026

The Securities and Exchange Commission sued three former executives of Tricolor Holdings on August 18, alleging they spent five years pledging the same subprime auto loans to multiple securitizations and warehouse facilities at once, hollowing out the collateral behind nearly $2 billion of asset-backed notes until the company had no way left to pay.

Named as defendants are Daniel Chu, Tricolor’s founder, controlling shareholder, chairman and chief executive; Jerome Kollar, its chief financial officer; and Ameryn Seibold, senior director of finance and director of treasury. The complaint, filed in the Southern District of New York, charges all three under the antifraud provisions of the Securities Act and the Exchange Act, adds control person liability against Chu and aiding-and-abetting counts against all three, and seeks disgorgement with prejudgment interest, civil penalties, and permanent officer-and-director bars against Chu and Kollar.

When Tricolor filed for Chapter 7 in September 2025, roughly $945 million of principal across seven outstanding securitizations was still owed to noteholders. The notes were trading at steep discounts to par.

A Funding Machine That Counted Paper Twice

Tricolor sold used cars and originated loans to borrowers with thin or nonexistent credit files, and it ran the two sides as a single funding machine. Receivables went first to warehouse lines for a cash advance, sat there for a few months, then moved into a securitization pool, at which point proceeds from note investors paid down part of the warehouse draw and freed capacity to originate again. The business could not operate without both channels running continuously.

The Commission alleges the executives kept that machine turning by counting the same paper twice:

• Receivables already pledged to warehouse lenders were dropped into securitization collateral pools that represented them as unencumbered.
• Securitized receivables were re-pledged back to warehouse facilities, in some cases almost immediately after a deal closed.
• Pools were padded with loans that should have been charged off under Tricolor’s own 120-day policy, with delinquency fields altered and vehicle identification numbers falsified to keep them looking eligible. Chu and other executives referred internally to these as dead loans.

According to the complaint, Chu instructed Kollar around 2019 to set up an off-the-books entity that staff called Company 23, which existed only in Tricolor’s records and served as a place to park dead loans and apply fictitious payments so they would present as current.

The arithmetic of that structure is what eventually killed the company. Pledging one receivable to several claimants obligated Tricolor to service the same loan multiple times against a single stream of borrower payments, at most. The SEC puts the resulting hole in the collateral base at roughly $800 million.

Independent analyses in the record converge on similar figures. A forensic firm retained by the bankruptcy trustee concluded the borrowing base was inflated by at least $675 million. An internal review Kollar himself ran in August 2025 showed reported collateral of about $2.2 billion against roughly $1.4 billion actually available. A separate post-bankruptcy analysis found that of 12,486 loans in the final 2025-2 deal, at least 6,850 were pledged to another counterparty, including 3,225 that were simultaneously carried in a securitization from 2022.

Every Verification Path Led Back Through Tricolor

For allocators, the most instructive part of the case is not the scheme but how long it survived contact with sophisticated counterparties. At least three broker-dealers underwrote the deals. Multiple audits ran annually across the company and its individual warehouse facilities. Repeat institutional investors bought successive vintages.

What made that possible is that nearly every verification path led back through Tricolor. Monthly servicing reports detailing note performance, delinquency data, defaults and recoveries were produced by Tricolor and carried officer certifications signed by Chu and Kollar attesting to their accuracy. Borrowing base reports supporting warehouse draws came from the same finance staff and were submitted several times a week. When one auditor asked for servicing reports covering deals from 2021 and 2022, Kollar sent them as static documents so the underlying detail could not be examined. Near the end, Seibold told Chu that a hundred account ledgers had to be falsified before an audit could be closed.

No party in the structure held an independent view of which loans were pledged where. The offering documents warranted that receivables were free of other liens, and the diligence chain then relied on the warrantor to confirm it.

Caught by Loans That Would Not Amortize

The break, when it came, was small and arithmetic. In August 2025 an analyst at a firm that was both a warehouse lender and a noteholder noticed that loans Tricolor marked as current were not showing corresponding reductions in outstanding principal month over month. Borrowers who are paying amortize. These were not. The firm flagged it to a fellow lender, which confirmed the discrepancy and ran its own analysis, identifying about $365.5 million of double-pledged principal across the seven outstanding securitizations.

The complaint describes an ensuing scramble rather than a disclosure. Executives moved to an encrypted group chat that Chu proposed naming 911, and the messages were later deleted at his direction, with Chu checking colleagues’ phones to confirm. On recorded calls, he floated fabricating deferment policies to explain the delinquent loans, weighed blaming the anomalies on a system error, and considered stuffing the bad collateral into one more securitization to wash it out. That deal never happened. Lenders called the debt, and Tricolor placed more than a thousand employees on unpaid leave on September 6 and filed four days later.

Pay Tied to Deals That Could Not Have Closed

Chu’s salary rose from $1 million in 2023 to $2 million in 2025, alongside a $2 million bonus for 2024, two securitization success bonuses of $125,000 each, and a $15 million special bonus in 2025. Kollar took $275,000 in securitization success bonuses that year. Seibold received $25,000 for closing an audit the SEC says he corrupted. In August 2025, with Tricolor insolvent by Chu’s own acknowledgment to Kollar, he directed the company to repay a $6.5 million short-term loan he had extended weeks earlier, then bought a $2.65 million property in Beverly Hills days later.

The civil action parallels criminal proceedings already well advanced. Kollar and Seibold pleaded guilty in December 2025 to bank fraud, wire fraud, securities fraud and destruction of evidence. Chu was indicted the same month and faces a superseding indictment from June 2026 that added securities fraud counts.

The SEC has said its investigation is continuing. The complaint identifies the underwriters and audit firms only by letter, and assigns them no wrongdoing. Warehouse lenders have collectively reserved more than $500 million against their exposure.