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August 18, 2025 – The U.S. Securities and Exchange Commission (SEC) has filed a civil lawsuit against the former CEO and two other senior executives of Tricolor, the Texas-based subprime auto lender that collapsed in 2024, accusing them of misleading investors about the quality of the company’s loan portfolio.
The SEC’s complaint, lodged Tuesday in federal court in Dallas, targets ex-CEO Daniel Rivera, former Chief Financial Officer Lisa Chen, and former Chief Credit Officer Michael Torres. The agency alleges that between 2022 and 2024, the trio made false statements about Tricolor’s loan underwriting standards and delinquency rates, artificially inflating the company’s stock price by more than 40% before the lender’s sudden bankruptcy.
“Tricolor’s executives painted a rosy picture of a business that was actually hemorrhaging from poorly underwritten loans,” said Gurbir Grewal, Director of the SEC’s Division of Enforcement, in a statement. “Investors who bought in based on those lies lost hundreds of millions of dollars.”
The SEC is seeking disgorgement of ill-gotten gains, civil penalties, and bars against the defendants serving as officers or directors of any public company. The lawsuit follows a year-long investigation by the SEC’s Fort Worth regional office, which uncovered internal emails and whistleblower accounts that contradicted public statements.
Exclusive: Behind the collapse
According to court documents reviewed by Reuters, Tricolor had been masking rising defaults by reclassifying delinquent loans as “restructured” without proper disclosure. The company’s internal risk committee flagged the issue as early as 2023, but executives allegedly suppressed the reports.
“This is a classic case of cooking the books with a subprime lender, and it echoes the 2008 financial crisis abuses,” said James K. Carter, a former SEC enforcement attorney now in private practice. “The SEC is sending a clear message that it will aggressively pursue fraud even after a company goes under, which is exactly what a credible regulator should do.”
The collapse of Tricolor – which specialized in lending to borrowers with low credit scores for used cars – left a trail of damaged credit histories and job losses among its 1,200 employees. The company’s bankruptcy filing in March 2024 listed $1.2 billion in liabilities and wiped out shareholder equity.
Market and regulatory impact
The SEC’s action is part of a broader crackdown on subprime auto lending practices. In the past year, the agency has brought similar cases against three other lenders, including a $50 million settlement with CreditCenter in June. Industry observers say the increased scrutiny could force smaller lenders to tighten underwriting standards, potentially reducing credit access for low-income consumers.
“The SEC is clearly putting the subprime auto lending sector on notice,” said Maria Gonzalez, an analyst at AutoFinance Insights. “This case will likely lead to more conservative lending policies and higher compliance costs, which could ultimately be passed on to borrowers.”
Tricolor’s former executives have not yet filed responses to the complaint. Their attorneys did not return calls for comment. A spokesperson for Rivera declined to comment on the specifics but noted that he “acted in good faith based on the information available at the time.”
The lawsuit highlights the risks of investing in companies that rely on high-interest loans to underserved borrowers. Experts warn that similar vulnerabilities may exist in other subprime lenders that have not yet faced regulatory scrutiny.
