CEO’s $6.25M Payout Precedes Layoffs at Tricolor Holdings

A significant corporate scandal has unfolded at Tricolor Holdings, a subprime car lender, as the company announced the layoff of over 1,000 employees just weeks after its CEO, Daniel Chu, received a substantial payout of $6.25 million. The layoffs were confirmed on September 6, 2025, followed by a Chapter 7 bankruptcy filing—indicating liquidation rather than restructuring—only four days later.

Federal prosecutors allege that Chu, 62, received the two payments on August 19 and August 20, shortly after he had referred to Tricolor as “definitely insolvent.” These payments represent the final portion of a $15 million bonus that Chu had instructed the company’s chief financial officer to disburse. Following the first payment, he proceeded to purchase a property in Beverly Hills, California, on August 27.

During the two years leading up to August 2025, Tricolor paid Chu more than $19.3 million in salary and bonuses. His compensation increased significantly, with his annual salary rising from $1 million to $2 million, and an additional $2 million bonus awarded for 2024.

The company’s financial troubles stem from allegations of systematic fraud. According to federal prosecutors, Tricolor engaged in a scheme that involved pledging the same vehicles and loans to multiple lenders simultaneously, akin to pawning the same item multiple times. Additionally, executives reportedly falsified records to suggest that customers were making payments when they had actually ceased.

By August 2025, Tricolor had pledged approximately $2.2 billion in collateral to lenders, yet only had $1.4 billion in real assets, leading to an $800 million shortfall. This left lenders with outstanding debts exceeding $900 million. Secret recordings obtained by prosecutors captured Chu and other executives discussing strategies to cover up discrepancies when lenders began to discover the truth last August.

In one recorded conversation, Chu allegedly suggested blaming the issues on a fictitious “Trump administration deferment policy.” In another instance, he compared the situation to the Enron scandal, asserting that the unfolding events could serve as “f***ing perfect” leverage against lenders.

Two other executives from Tricolor, Jerome Kollar, the chief financial officer, and Ameryn Seibold, the finance director, have already pleaded guilty and are cooperating with authorities.

Founded in 2007, Tricolor originally aimed to serve Hispanic customers with limited or no credit history. The company expanded over the years, becoming the third-largest used car retailer in Texas and California, operating 65 dealerships across six states. Its annual revenue reached around $1 billion in both 2023 and 2024. As of its bankruptcy filing, over 60,000 car loans remained outstanding.

Chu now faces numerous charges, including conspiracy, bank fraud, and wire fraud. Alongside him, David Goodgame, the chief operating officer, was arrested and faces similar charges. Both men were detained on Wednesday, with Chu captured in Miami and Goodgame in Texas. If convicted of the most severe charge, which involves continuing a financial crimes enterprise, Chu could face a mandatory minimum sentence of 10 years and a potential maximum of life imprisonment.

The unfolding events at Tricolor Holdings serve as a stark reminder of the potential consequences of corporate misconduct, with thousands of employees now facing an uncertain future as the company navigates its bankruptcy proceedings.