Tricolor Files for Bankruptcy Amid Fraud Allegations

On Wednesday, auto dealer Tricolor submitted a Chapter 7 bankruptcy petition in Texas, signaling its intent to liquidate. This move came just a day after Fifth Third Bank issued warnings about potential fraudulent activities involving the company.

The bankruptcy filing reveals that Tricolor, which ranks as the third-largest used car retailer in Texas and California, possesses more than $1 billion in assets and liabilities, alongside a staggering 25,000 creditors.

Fifth Third Bank, along with another institution, indicated they uncovered possible external fraud associated with a $200 million asset loan connected to Tricolor in Irving, Texas.

In light of the situation, Fifth Third Bank is collaborating with law enforcement and anticipates an impairment charge of between $170 million and $200 million related to the loan.

It seems other banks may also suffer losses due to Tricolor’s bankruptcy, with reports suggesting that JPMorgan has an exposure close to $200 million tied to the company.

Both JPMorgan and Fifth Third refrained from commenting on the matter as of Wednesday.

The attorney who aided in Tricolor’s bankruptcy filing declined to address the allegations of fraud, stating he was no longer associated with the company post-filing.

According to sources, the U.S. Department of Justice is now looking into claims of misconduct linked to Tricolor, though the Department has yet to respond to inquiries regarding the investigation.

Tricolor previously stated its mission focused on reaching six states to sell cars and offer loans primarily to low-income Hispanic communities across the Southwest. They aimed to assist “invisible” workers lacking access to traditional banking and credit systems.

In a June announcement, Tricolor claimed to have disbursed over $5 billion in affordable car loans to Hispanic buyers, letting them in on opportunities typically overlooked by conventional financial institutions.