Investors that suffered losses on asset-backed securities issued by now-insolvent subprime auto lender Tricolor have lodged a federal lawsuit against JPMorgan Chase, Barclays and Fifth Third, alleging the banks ignored obvious warning signs while marketing the debt.
The complaint, filed late Thursday in Manhattan federal court, was brought by holders of more than $230 million of Tricolor asset-backed notes sold between April 2022 and June 2025. The plaintiffs contend the banks - which also acted as major lenders to Tricolor - "fueled and perpetuated Tricolor's Ponzi-like fraud" by continuing to finance and securitize its auto loans.
According to the complaint, the banks assured investors the notes were investment-worthy even after internal and external audits in 2022 and 2024 reportedly showed problems. Those audits, the plaintiffs say, exposed inaccurately reported loan receivables and cash flow that was routinely directed to incorrect accounts or in some cases "made up." The suit states that some of the affected notes now trade for below 10 cents on the dollar and warns that aggregate investor losses could reach into the hundreds of millions of dollars.
"Rather than risk a massive loss on their warehouse lines and forfeit the millions of dollars of fees and income derived from Tricolor's fraudulent enterprise, defendants responded by hiding what they had learned and sticking their heads in the sand," the complaint states.
JPMorgan, Barclays and Cincinnati-based Fifth Third declined to comment on the litigation.
The plaintiffs include 30 investors, among them funds operated by Janus Henderson, Ellington Capital Management and One William Street Capital Management.
Background and criminal allegations
Tricolor, which focused on auto loans concentrated in lower-income Hispanic communities in the southwestern United States, filed for liquidation under Chapter 7 of the U.S. Bankruptcy Code on September 10 of the previous year. That Chapter 7 filing occurred 18 days before parts supplier First Brands sought Chapter 11 protection from creditors. The pair of bankruptcies was cited in the complaint as examples underscoring risk within private credit markets.
In December, Tricolor Chief Executive Daniel Chu and former Chief Operating Officer David Goodgame were indicted in Manhattan on charges alleging they systematically defrauded creditors and lenders. The indictment accuses them of falsifying loan data and double-pledging collateral. Both Chu and Goodgame have pleaded not guilty.
JPMorgan, Barclays and Fifth Third have each reported nine-figure losses tied to their exposure to Tricolor. JPMorgan Chief Executive Jamie Dimon has described his bank's exposure to the company as "not our finest moment."
Ongoing implications
The suit frames the banks' actions as central to the continuation and expansion of Tricolor's lending and securitization activities despite warnings, and seeks redress for investors who purchased the asset-backed notes during the period identified in the complaint. The litigation adds to scrutiny of private credit structures and raises questions about lender due diligence in securitizations tied to smaller, less-regulated finance businesses.