The SEC charged three former executives of Tricolor Holdings, a Texas-based subprime auto lender that collapsed into bankruptcy in September 2025, with running a multi-year fraud that raised $1.9 billion through asset-backed securities offerings on collateral that did not exist as represented. Former CEO Daniel Chu, former CFO Jerome Kollar and former Senior Director of Finance Ameryn Seibold allegedly double-pledged hundreds of millions of dollars in subprime auto loans to multiple ABS offerings and lenders simultaneously, then misrepresented those same loans as free of liens. Roughly $945 million in principal remained outstanding when the company failed.
The scheme, running from 2020 through the bankruptcy, also involved manipulating loan performance metrics so that non-performing loans appeared current enough to qualify for securitization, and making false statements about Tricolor’s financial health despite significant liquidity constraints. “We allege that these defendants defrauded investors based on bogus collateral and violated the integrity of our private credit markets,” said David Woodcock, Director of the SEC’s Division of Enforcement. The US Attorney’s Office for the Southern District of New York filed parallel criminal charges in December 2025.
What the case exposes is a structural gap in private credit ABS markets rather than a one-company failure. Double-pledging works only because no central registry cross-checks which loans back which securitization, leaving investors dependent on an originator’s own representations about collateral status, exactly the kind of self-certified verification gap regulators in other jurisdictions have been trying to close: the same absence of independent collateral checks is what keeps prompting fresh mini-bond warnings in the UK and what let a UK executive shop a fabricated bond portfolio before regulators caught it. Private credit’s growth has outpaced the infrastructure that would make collateral claims independently verifiable, and Tricolor is the clearest evidence yet that the market is still relying on trust where it needs a ledger.
Source: SEC
