By definition, only the less smart criminals get caught. If you really think about it, that opens the possibility of many perfect crimes out there that we will never see in a limited series.
On the other hand, if the indictment stands to proof, there is a good chance that Tricolor will show up on a screen near you in the foreseeable future.
Tricolor, which filed for bankruptcy in September 2025, was a Texan subprime auto lender that specialized in selling and financing cars for those with little to no credit history.
On the surface, it seems like a worthy business model to serve those for whom it would otherwise be difficult to buy a car. It is also legit for such a finance company to keep their funding costs low by borrowing from highly rated traditional banks and sharing the risk in their assets by packaging and securitizing auto loans and selling them on to investors.
Where the legitimacy might have run out was when Tricolor allegedly breached the integrity of the spreadsheet they used to track the delinquency status of their auto loans.
Tricolor is accused of changing auto loans that were more than 60 days delinquent to current status so they could still be used as collateral, and of pledging the same loans to multiple banks and investors.
Those of us who have worked with loan data know that the delinquency status is intricately related to the outstanding balance of the loan. If that column in the spreadsheet is not adjusted according to the delinquency flag or vice versa, the whole thing does not add up, and that is how Tricolor was found out. Literally.
We can make fun of it here in The Risk Report, but there is very little humor in fraud. It has left people without access to credit. At this point, Tricolor’s many creditors don’t know if they have lost all their money. JPMorgan, Fifth Third, Barclays, and BlackRock all had to write down at least part of their combined exposure of almost $500MN.
Had the banks involved been smaller and less diversified, and not had buffers in place for unexpected losses, this could have had a severe systemic impact.
And it has (re)cast a murky sheen on both non-bank financial institutions and private credit, making them seem less trustworthy because they can be riskier than traditional banking.
However, willingness to take a calculated risk is not the same as willingness to be defrauded. Back in the beginning of December, Marc Rowan, the CEO of Apollo Global Management, wrote an opinion piece for Bloomberg that debunked some of the myths around private credit, including the claim that it is opaque. Rowan pointed out that, because they deal in alternative assets, they have to conduct thorough, if not more, due diligence than traditional banks do for standardized loans.
And due diligence could very well be as pedestrian as having a junior analyst review Tricolor’s loan spreadsheet to check that each loan’s outstanding balance is consistent with its delinquency status, and sounding the car alarm if it is not.
Source: Bloomberg
FRG and The Risk Report find loan data integrity interesting because we help all kinds of financial institutions model and analyze it.
Regitze Ladekarl, FRM, is FRG’s Director of Company Intelligence. She has 25-plus years of experience where finance meets technology.
This article is part of the FRG Risk Report, published weekly on the FRG blog. To read other entries of the Risk Report, visit frgrisk.com/category/risk-report/.