The same fraud that cost JPMorgan $170M just hit a digital auction platform.

ACV Auctions (NASDAQ: ACVA), the largest digital wholesale auto auction platform in the U.S., disclosed an $18.71 million loss tied to Tricolor's bankruptcy in its Q4 and full-year 2025 earnings report on February 23, 2026.¹ The loss came through ACV Capital, the company's dealer floor plan financing arm, which provided revolving credit lines to Tricolor's 65-location used-car retail network.

ACV is the fourth major financial institution to disclose Tricolor-related losses. Fifth Third Bancorp recorded a $178 million charge-off. JPMorgan Chase took a $170 million hit. Barclays disclosed a $147 million impairment.¹¹ Total disclosed counterparty losses now exceed $514 million, with estimated total damages surpassing $900 million.

Key facts:

We first covered this case in our January 3, 2026 edition, when federal prosecutors unsealed the indictments and revealed covert recordings of executives discussing how to hide the fraud. Tricolor Execs Indicted: Recordings Catch Cover-Up in Progress

Today's story is the sequel: the fraud's financial damage is now spreading to counterparties who had no direct role in the scheme. Read the full blog coverage here.

_{Sources
1 Automotive News | ACV Auctions Reports Nearly $19M Tricolor-Linked Loss
2 Bloomberg | Car Auction Firm Reports Nearly $19M Tricolor-Linked Loss
3 Motley Fool | Why ACV Auctions Stock Just Dropped
4 ACV Auctions IR | Q4 & Full-Year 2025 Results Press Release
5 IndexBox | ACV Auctions Q4 2025: Revenue Up 15.1%
6 Insurance Journal | Tricolor Founder Can Tap Insurance for Fraud Defense
7 NBC News | Former Executives of Bankrupt Auto Dealer Tricolor Indicted
8 Auto Remarketing | Unsealed Federal Indictment Details Depth of Tricolor Fraud
9 CarPro | Tricolor Bankruptcy Now Involves Criminal Charges
10 Reynolds Center / BusinessJournalism.org | Tricolor Investigation
11 Bloomberg Law | JPMorgan, Barclays, Others Owed $613M Under Tricolor Loan
12 PYMNTS | Subprime Auto Lender Tricolor Files to Liquidate
13 Morgan Lewis | Recent Bankruptcy Cases and Managing Fraud Risk
14 McDonald Hopkins | Tricolor Bankruptcy Causes Lenders to Reassess Risks
15 RSM US | Tricolor's Bankruptcy: Wake-Up Call for Investment Oversight}

ACV Auctions does not originate subprime auto loans. Its core business is running the largest digital wholesale auto auction marketplace in North America. But ACV also operates ACV Capital, a floor plan financing division that provides revolving credit lines to auto dealers so they can purchase inventory at auction. Tricolor, which ran 65 used-car retail locations across six states, was an ACV Capital borrower.⁴

When Tricolor filed Chapter 7 on September 10, 2025, its assets turned out to be worth far less than represented. ACV Capital's outstanding floor plan loans to Tricolor became uncollectible. The $18.71 million provision represents roughly 9% of ACV Capital's $207 million total receivable portfolio as of mid-2025.⁴

This is the detail that matters for risk professionals: ACV was not a warehouse lender. It was not funding Tricolor's loan originations. It was providing a different credit product to the same entity. The fraud's damage crossed product boundaries because the underlying corporate entity was fraudulent, not just its lending practices.

The Tricolor fraud operated through a simple mechanism executed at scale. Between approximately 2018 and 2025, Tricolor's management double-pledged approximately 29,000 auto loans across multiple warehouse lending facilities.⁸ The company represented $2.2 billion in pledged collateral, but the actual asset base was only $1.4 billion, an $800 million gap. Loans already delinquent or written off were falsely reported as current in borrowing base reports. Single car loans were counted multiple times across different credit lines.¹³

Four counterparties have now disclosed specific losses:

Total disclosed losses: $514 million across four institutions. Estimated total damage across all counterparties exceeds $900 million.⁷ And the number may not be final. Triumph Financial also attempted to secure collateral post-collapse, suggesting additional exposure that has not yet been publicly quantified.¹⁴

The core failure was structural. No cross-referencing mechanism existed to detect the same collateral being pledged to multiple lenders simultaneously.¹⁴ Each warehouse lender evaluated Tricolor's borrowing base reports independently. Each relied on borrower-provided data without independent verification against the other facilities.

McDonald Hopkins, in their post-collapse analysis, identified six structural controls that warehouse lenders are now adopting:¹⁴

Morgan Lewis added a seventh lesson: overreliance on borrower-provided data, without independent verification from authoritative sources, is the mechanism that enables this type of fraud at scale.¹³ The data that would have revealed the fraud, entity registrations, lien filings, collateral positions, existed in public records. It simply was not being checked against what the borrower reported.

The case is moving through the federal court system with two cooperating witnesses strengthening the prosecution.

A federal grand jury unsealed indictments on December 17, 2025, charging founder Daniel Chu and former COO David Goodgame with conspiracy, bank fraud, and wire fraud. Chu faces an additional charge of Continuing Financial Crimes Enterprise, which carries a mandatory minimum of 10 years and a maximum of life in prison.⁷

Both pleaded not guilty on January 13, 2026, before U.S. District Judge Kevin Castel in Manhattan. No trial date has been set.⁷

The prosecution's position is significantly strengthened by two cooperating witnesses: former CFO Jerome Kollar and former finance executive Ameryn Seibold, both of whom pleaded guilty. The indictment also references covert recordings of executives discussing how to conceal the fraud from lenders, the detail that made our January 3 coverage resonate so strongly with readers.⁷

On February 5, 2026, Bankruptcy Judge Michelle V. Larson approved the release of $5 million from Tricolor's $15 million D&O insurance policy for Chu's criminal defense costs, rejecting the bankruptcy trustee's request to cap payouts at 10%.⁶ The remaining $10 million is subject to further proceedings.

For lenders tracking this case: pretrial proceedings may produce additional disclosures as cooperating witnesses provide testimony. New counterparty losses or previously unknown fraud mechanisms could surface in court filings before any trial date is set.

Tricolor exploited three specific gaps that exist across lending operations today.

Gap 1: No collateral cross-referencing across lenders. Each warehouse facility verified collateral independently using borrower-provided data. No shared registry or real-time cross-check flagged the same auto loan appearing in multiple borrowing bases. This is the same structural vulnerability that enables loan stacking in the MCA space, where borrowers take advances from multiple providers without disclosure.

Gap 2: Entity status not monitored continuously. Tricolor operated through 18 entities under its parent Ganas Investors.¹⁰ Corporate statuses at the Secretary of State level changed when the company filed Chapter 7 in September 2025. Lenders monitoring entity status in real time would have received early warning signals before the public collapse. Those relying on periodic reviews, or no reviews at all, learned about it from the news.

Gap 3: Borrower-reported data accepted without independent validation. Tricolor's CFO wrote an internal memo noting that shifting delinquency statuses on certain loans could yield "$1 million+" in additional borrowing capacity from warehouse lenders.¹⁰ That memo was not discovered until after the collapse. If lenders had independently verified loan performance data against servicing records or public filings, the mismatch would have been detectable years earlier.

The ACV disclosure shows that counterparty risk is not limited to direct lending relationships. If your business extends credit to, purchases receivables from, or provides floor plan financing to entities in the auto lending ecosystem, the Tricolor case applies to you.

Monitor entity status continuously. Point-in-time verification at origination is not enough. Tricolor's entities were active and in good standing for years while the fraud was running. The status changes that signaled trouble happened when the company collapsed. Continuous monitoring from Secretary of State records across all 50 states is the baseline for catching these transitions when they happen, not weeks later.

Cross-reference collateral and UCC filings. If you lend against collateral, verify that the same assets are not pledged elsewhere. UCC filing data, available through state records, can reveal existing liens and security interests that conflict with what the borrower reported on your application.

Map your counterparty network. ACV did not consider itself exposed to subprime auto lending fraud. It was exposed through a different product (floor plan financing) to the same fraudulent entity. Map which of your borrowers, partners, and referral sources have relationships with entities in stressed sectors. If you cannot name your indirect exposures, you cannot manage them.

Verify independently. Do not rely on borrower-provided data as your sole source of truth. Public records, from SOS entity databases to UCC filings to court records, provide independent verification that no borrower can falsify. The gap between what a borrower reports and what public records show is where fraud lives.

Most states let businesses reinstate after a revocation.

Nevada does not.

"Permanently Revoked" means the entity can never be restored, and any business operating under that registration is doing so without legal authority.

Nevada is also the top state for shell company formation.

Cobalt's SOS API cross-references formation data to flag the gaps privacy laws create.

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