CEO’s $6.25 Million Payday Precedes Layoffs for 1,000 Workers

A significant corporate scandal has unfolded at Tricolor Holdings, a subprime car lender, where over 1,000 employees were placed on unpaid leave just days after CEO Daniel Chu allegedly received a $6.25 million payout. The financial turmoil began when the company filed for Chapter 7 bankruptcy on September 10, 2025, indicating a liquidation process rather than a restructuring effort. The move left a large number of workers without pay and raised serious questions about the leadership’s actions leading up to the collapse.

According to a federal indictment unsealed by the US Attorney’s Office for the Southern District of New York, Chu received two substantial payments on August 19 and August 20, shortly before the layoffs commenced. The indictment alleges that these payments were part of a $15 million bonus that Chu directed the company’s chief financial officer to disburse. This financial maneuver occurred just weeks after Chu described Tricolor as “definitely insolvent,” indicating a troubling disconnect between his financial decisions and the company’s operational status.

The fallout from Tricolor’s collapse can be traced back to years of alleged fraud. Prosecutors claim that the company engaged in systematic malfeasance, including double pledging cars and loans to multiple lenders and falsifying customer payment records. By August 2025, Tricolor had pledged approximately $2.2 billion in collateral while only possessing $1.4 billion in legitimate assets, creating an $800 million shortfall. As a result, lenders are owed over $900 million.

In the aftermath, secret recordings obtained by prosecutors reportedly feature Chu discussing strategies to deflect attention from the company’s financial discrepancies. In one conversation, he allegedly suggested blaming the loan issues on a non-existent “Trump administration deferment policy.” In another instance, he likened the developing scandal to that of Enron, indicating a level of awareness about the severity of the situation.

Tricolor, founded in 2007, initially aimed to provide used cars to Hispanic customers lacking credit history. At its height, the company operated 65 dealerships across six states and employed over 1,500 individuals, generating annual revenues of around $1 billion in both 2023 and 2024. However, by the time of its bankruptcy filing, more than 60,000 car loans remained unsettled, leaving many customers and employees in limbo.

Two additional executives from Tricolor, Jerome Kollar, the chief financial officer, and Ameryn Seibold, the finance director, have already pleaded guilty to charges and are cooperating with authorities. The company’s chief operating officer, David Goodgame, was arrested alongside Chu and faces similar charges, including conspiracy and fraud.

Chu’s financial decisions and the company’s practices have drawn scrutiny, and he now faces serious legal repercussions. If convicted of the most severe charge of continuing a financial crimes enterprise, he could face a mandatory minimum sentence of 10 years, with a potential maximum of life imprisonment. As this situation develops, the impact on the displaced employees and the company’s creditors remains to be seen.