SEC sues three ex-Tricolor executives over bond fraud

• Key insight: The SEC is pursuing as securities fraud the same Tricolor conduct that federal prosecutors charged as a fraud against the company's bank lenders.
• What's at stake: Investors in Tricolor's bonds were still owed about $945 million when the company filed for bankruptcy, and the SEC wants the three executives to give up what they made and pay civil penalties.
• Supporting data: One lender's August 2025 analysis found about $365.5 million of double-pledged principal across the seven Tricolor bond deals still outstanding.

Overview bullets generated by AI with editorial review.

The Securities and Exchange Commission sued three former Tricolor Holdings executives Tuesday, accusing them of hiding from bond investors that the subprime auto lender had double-pledged car loans to several lenders at once.

The SEC charged Daniel Chu, Tricolor's founder and chief executive; Jerome Kollar, its chief financial officer; and Ameryn Seibold, its senior director of finance. The scheme allegedly ran from at least 2020 until the company shut down in September 2025.

The Department of Justice had previously charged all three with defrauding the banks and other financiers that lent Tricolor money (including, as American Banker reported previously, JPMorganChase, Fifth Third Bancorp and Barclays).

The Justice Department's case also charged all three with wire fraud and securities fraud. It charged Kollar and Seibold with destroying evidence.

As of this week, the SEC is now pursuing civil securities fraud claims over that same conduct — fraud against the investors who bought Tricolor's bonds, according to the complaint. Those bonds were allegedly backed by double-pledged auto loans.

The complaint identifies the lenders, underwriters and bond buyers only as Financial Institutions A through F and does not name any of them.

Kollar and Seibold pleaded guilty in December in the earlier case brought by the Justice Department, and prosecutors said at the time that both were cooperating. Chu has pleaded not guilty and is set to face trial in October.

The SEC's case is "a rehash of allegations that have already been made against Mr. Chu by others over the past year," Matthew Schwartz, Chu's lead attorney, told American Banker.

"Many of those allegations are inaccurate, as will be clear when the real facts come out," Schwartz said. "We look forward to a full and fair hearing in the courtroom."

Seibold's attorney Michael Uhl told American Banker he was familiar with the lawsuit but had no comment.

Kollar's attorney did not immediately respond to a request for comment.

A brief on Tricolor's business model

When it was solvent, Tricolor issued auto loans. It funded those loans with so-called warehouse lines of credit.

Warehouse lines of credit get their name from the standard arrangement; a company with a warehouse that produces widgets goes to a bank to ask for a line of credit. In exchange, the bank holds the widgets in the warehouse as collateral.

This was the case with Tricolor. The widgets it produced were auto loans, and its warehouses were metaphorical rather than literal.

When one of Tricolor's warehouse lenders advanced cash to it, Tricolor used that cash to issue auto loans. All of the loans it issued on that advanced cash sat in the metaphorical warehouse, and the bank could claim them if Tricolor defaulted.

In normal course, those loans would have sat in that warehouse only until Tricolor could sell them, bundled together, on the bond market. It could then use those proceeds to pay down the warehouse line of credit.

Instead, according to prosecutors, Tricolor misrepresented to its warehouse lenders and bond buyers which auto loans belonged to whom.

The check nobody ran

Tricolor's contracts with its lenders barred pledging a loan twice, according to the SEC. The contracts also had a check built in.

To draw cash, Tricolor had to send each lender reports listing every loan pledged to that credit line, with eligibility tests applied to each loan, such as whether the borrower was paying on time, according to the complaint.

But those reports and the so-called data tape behind them (the loan-level file listing Tricolor's loans) came from Tricolor itself, so no lender could independently see what Tricolor had pledged to others. A loan pledged twice would pass the checks as long as Tricolor's data said it was clean.

Chu and Kollar discussed that blind spot in July 2023, when a lender was auditing the warehouse of auto loans its credit line funded.

"[T]hey will definitely check for dups," Chu wrote, referring to duplicate loans, according to the complaint. In other words, Chu allegedly expressed concern that the audit would reveal Tricolor had been double-pledging loans.

Kollar answered that the lender would find the shortfall by totaling every warehouse facility against its data tape.

"[I]f they compare to the data tape and add up all the warehouse and securitizations, we will have more loan $$ than the data tape total," Kollar wrote, according to the complaint.

In other words, Kollar allegedly reasoned that adding up the loans pledged across every Tricolor credit line and bond deal would total more loans than the company actually had.

Two years later, Kollar was still directing the practice. In a June 2025 email, he told an employee to include roughly 3,000 double-pledged loans in the reports for both a new bond deal and one from 2022, according to the complaint. The employee wrote back to check, naming the two deals by their internal labels.

"Just to confirm you are asking to leave the 3,225 contracts in both the TAST2025-2 and TAST2022-1 reports?" the employee wrote, according to the complaint. Kollar replied, "Yes."

An analysis after the bankruptcy, which the complaint does not attribute to a named firm, preliminarily identified at least 6,850 of the 12,486 loans in Tricolor's June 2025 bond deal as double-pledged.

Fake payments kept dead loans current

A second strand of the Tricolor scheme involved hiding loans on which borrowers had quit making payments — what the company called "dead loans," according to the complaint.

All three executives knew Tricolor needed clean audits before it could do another bond deal and issue more auto loans, according to the SEC.

So, Seibold allegedly falsified account ledgers and vehicle identification numbers to get clean audit opinions, knowing the reports would reach lenders and investors.

Tricolor allegedly rewarded him for his efforts. Seibold received a $25,000 bonus in 2025 for finishing an audit of the 2024 financial year, which he allegedly lied to close, according to the SEC's complaint.

Around 2019 (earlier than the SEC dates the rest of the scheme), Kollar set up a fictional company to hide the dead loans, according to the complaint. He allegedly did so at Chu's instruction. Tricolor staff called it "Company 23." The company existed only in Tricolor's records, according to the complaint.

Dead loans got parked there, and Chu and Kollar allegedly recorded fake payments against them to make the loans look current. Tricolor then gave those falsified ledgers and reports to auditors, lenders and investors.

The complaint does not name the firms that audited Tricolor or say whether any of them faces scrutiny.

An analyst noticed the balances

In August 2025, an analyst at a firm that was both a Tricolor lender and an investor in its bonds started checking some of the reports Tricolor gave it.

Specifically, the analyst compared the loan data Tricolor sent his firm from one month to the next, checking whether balances were falling the way they should as borrowers made payments.

In running those numbers, the analyst noticed that, month after month, loans the company reported as current were not showing any drop in principal, according to the SEC's complaint.

The analyst's firm raised the matter with another lender, whose own review of the loan data then uncovered the double-pledging itself: about $365.5 million in loans across Tricolor's seven outstanding bond deals that were also pledged elsewhere, according to the complaint.

As the lenders closed in, Chu looked for an explanation. Minutes before a call with two of them, on a recorded line, he allegedly asked the other executives what to say.

"What do I throw out there as a system issue?" Chu said, according to the complaint. "We have to have some sort of system issue."

Chu took millions of dollars out of Tricolor in the weeks before its collapse, and the SEC and the Justice Department describe that money differently.

The SEC this week called it repayment of a $6.5 million loan Chu had made to the company weeks earlier. Chu directed the repayment even as he acknowledged to Kollar that Tricolor was insolvent, according to the complaint.

The Justice Department, in December, called payments in the same window the final installments of a $15 million bonus. Chu allegedly bought a $2.65 million property in Beverly Hills days later.

Tricolor filed for Chapter 7 bankruptcy in September 2025, days after putting more than 1,000 employees on unpaid leave.

The SEC wants Chu, Kollar and Seibold to give up what they made and pay civil penalties. It wants Chu and Kollar barred from serving as officers or directors of any public company.

The complaint does not put a figure on what they should have to pay.

When Tricolor filed for bankruptcy last September, it still owed investors in its bonds about $945 million, according to the SEC's complaint Tuesday.

Separately, Tricolor's warehouse lenders (the ones that advanced it the cash it lent out as auto loans) have set aside more than $500 million in losses, which they attributed in public disclosures to "alleged fraudulent activity," according to the complaint.

The SEC said its investigation is ongoing. A spokesperson for the commission declined to say whether it reaches Tricolor's auditors or the firms that underwrote its bonds.