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A Dallas-based auto lender built on giving car loans to illegals has just gone belly up, and it’s dragging Wall Street down with it.

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Tricolor Holdings was once hailed by the US Treasury as a “community development” success story. Now, they’ve just filed for bankruptcy as fraud allegations and a full-blown federal investigation overtake them. The company, which sold overpriced used cars to illegals and wrapped the scheme in a feel-good “social lending” label, is leaving major US banks like JPMorgan, Barclays, and Fifth Third staring at massive losses.

Here’s a closeup of the images:

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Tricolor built its entire business model around financing cars for illegals who couldn’t qualify for traditional loans. That meant sky-high interest rates, inflated car prices, and very risky lending practices. But even so, Wall Street happily backed it anyway, because it was supposedly a “socially responsible” investment. These loans carried a special US Treasury certification as a “Community Development Financial Institution.” In the most simple terms, the US government gave this company the stamp of approval for “helping underserved communities.”

We’re literally financing our own demise. If this doesn’t infuriate you, something is wrong.

Meanwhile, Barron’s and state regulators were calling out red flags like selling cars without proper titles, sloppy paperwork, and those crazy inflated prices. And if that wasn’t bad enough, there were already whispers of shady behavior inside the company. One co-founder had a criminal record for selling stolen cars. And CEO Daniel Chu was facing many accusations of financial misconduct.

Then Fifth Third Bancorp, a partner in this mess, discovered “alleged fraud,” and that’s when everything collapsed. The company filed for liquidation, and now prosecutors are investigating.

Barrons:

As Tricolor benefited from Wall Street’s largess, U.S. banks and ratings firms appear to have missed or overlooked warning signs. So too may have the U.S. government, which awarded Tricolor a special U.S. Treasury certification in 2019. In 2022, Barron’s found Tricolor was selling cars well above market averages while touting its designation from the U.S. Treasury as a Community Development Financial Institution—a government seal of approval for social lenders.

Tricolor was also repeatedly cited by state motor-vehicle and financial regulators, Barron’s found, for lapses that included delayed title transfers, improper use of temporary license plates, and selling cars for which the company didn’t hold title. Fifth Third Bancorp recently disclosed it faced up to $200 million in losses tied to what it said was alleged fraudulent activity at a commercial borrower, which a person familiar with the matter identified as Tricolor. Fifth Third hasn’t disclosed any details of the alleged fraud. “When you have a fraud, it’s ultimately a client selection issue,” Fifth Third CEO Timothy Spence said at a Sept. 10 banking conference.

“We’re not in the business of doing business with people who commit fraud.” One of Tricolor’s co-founders, Texas businessman Ken Weaver, had served prison time for selling stolen cars, then failed to disclose that history when seeking to run a Texas utility that racked up customer complaints under his watch, according to local news reports. In a 2022 interview, Chu told Barron’s he forced Weaver out after learning of his past.

Barron’s was unable to locate Weaver for comment. Chu’s own record includes allegations of financial mismanagement and self dealing. Before co-founding Tricolor, Chu resigned from his role as president at another used-car company after accounting irregularities surfaced, according to a regulatory filing with the Securities and Exchange Commission. Chu said he wasn’t involved with the firm’s accounting.

Chu was also sued by partners in a tech business for allegedly giving away their stake in the venture to settle a personal debt, a transaction for which Chu later disclaimed responsibility. JP Morgan, Barclays, Fifth Third, BlackRock, Pimco, AllianceBernstein, S&P, and the Treasury’s Community Development Financial Institution Fund either declined to comment about Tricolor’s history and Chu’s background or didn’t respond to requests.

Chu didn’t respond to requests for comment and has made no public remarks in the weeks since Tricolor’s apparent collapse, but Barron’s spoke to him over multiple conversations lasting several hours for its 2022 report. At the time, Chu said Tricolor sold cars at lower margins than competing dealership chains, spending generously on presale repairs and reconditioning.

Citations from state motor-vehicle and financial regulators were largely due to missteps by outside vendors Tricolor works with, he said. Chu said he believed himself to have been exonerated in the claim by the tech-company investors and had committed no wrongdoing.

Tricolor’s collapse exposes a dark truth about how entire businesses that have been propped up by Wall Street and government DEI and “equity” programs have literally thrived on Biden’s illegal immigration boom.

Now, as Trump’s return to law and order changes the game and ICE cracks down, those shadow-economy businesses are starting to crumble. And for many Americans who’ve watched their towns, wages, and tax dollars stretched to the breaking point, this meltdown doesn’t feel like a tragedy… it’s karma and long-overdue justice.

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