Tricolor Noteholders File Lawsuit Against JPMorgan, Barclays, and Fifth Third

Investors Sue Major Banks Over Alleged Role in Tricolor Fraud

A group of investment firms holding over $230 million in Tricolor Holdings notes have filed a lawsuit against JPMorgan Chase & Co., Barclays Plc, and Fifth Third Bancorp. The suit, brought in New York, accuses these banks of enabling fraudulent activities at Tricolor, a used-car dealer and lender that has since declared bankruptcy.

The plaintiffs, including One William Street Capital Management and Janus Henderson Group Plc, allege that the banks overlooked clear signs of wrongdoing at Tricolor. According to the complaint, the banks continued to profit from underwriting Tricolor’s securitized notes, despite “alarming” audit findings in 2022 and 2024 that pointed to serious irregularities.

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Tricolor entered bankruptcy proceedings in September. Later, founder and former CEO Daniel Chu, along with others, faced charges for allegedly deceiving both banks and investors by either double-pledging or exaggerating the value of loan collateral that was nearly worthless. Chu has denied the charges.

The lawsuit claims that the banks ignored substantial evidence of fraud, including audit reports that revealed major discrepancies. These included misapplied payments, false recoveries from repossessions that never happened, and inaccurate reporting of overdue loans.

Representatives for JPMorgan, Barclays, and Fifth Third have declined to comment on the litigation.

Following Tricolor’s bankruptcy, the three banks acknowledged that they could collectively face losses amounting to hundreds of millions of dollars. “It is not our finest moment,” JPMorgan CEO Jamie Dimon remarked in a press call last October.

According to the investors, the banks not only failed to act on the audit warnings but also concealed or misrepresented critical information in documents provided to potential investors. The plaintiffs argue that this behavior allowed Tricolor’s fraudulent scheme to continue.

The case is titled One William Street Capital Master Fund Ltd. et al v. JPMorgan Chase Bank, National Association et al, 26-cv-01622, in the US District Court for the Southern District of New York.

Additional Reporting

Reporting contributed by Hannah Levitt, Yizhu Wang, Robert Burnson, and Scott Carpenter.

(Barclays also declined to comment.)

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