Prosecutors say Tricolor’s CEO bonus was paid weeks before the bankruptcy

US prosecutors have alleged that the CEO of high-risk car company Tricolor directed his deputy to send him $6.25 million in bonuses in August, while exposing fraudulent schemes supporting the company.

Tricolor CEO and founder Daniel Chu asked CFO Jerome Kollar to send the final two payments of his $15 million annual bonus on Aug. 19 and 20, according to the federal indictment unsealed Wednesday.

Cho, who is accused of engaging in “systematic fraud” over a period of approximately seven years until 2025, used some of the money to purchase a “multi-million dollar property” in Beverly Hills, California, later that month, according to the filing.

Within days of paying Choo’s bonuses, Tricolor placed more than 1,000 employees on unpaid leaves of absence. By September 10, the company filed for bankruptcy protection.

Lawyers representing Chu did not immediately respond to emails seeking comment on the allegations.

Prosecutors say Tricolor created about $800 million in “fake collateral” — at Chu’s direction — by double-pledging the same assets for multiple loans and by having employees manually alter records to make delinquent loans appear to qualify as collateral, according to the indictment.

The sudden collapse of Tricolor Bank was one of a series of defaults that roiled the US banking industry this fall, raising concerns about underappreciated risks in the US financial system.

Around the time the bonuses were paid, Chu allegedly knew that his company was, in his words, “fundamentally historical,” according to the filing.

Prosecutors cited “secretly recorded” calls in August that included Chu, the CFO and the chief operating officer as the founder looked for ways to keep the company’s lenders on the hook.

While the indictment did not name the banks that Tricolor allegedly defrauded, JPMorgan Chase, Barclays and Fifth Third Bank You have disclosed the fees associated with the borrower.

After Tricolor’s lenders confronted Chu about questions about the collateral pledged for the loans, the CEO falsely suggested that some of the manipulated data was related to the Trump administration’s loan deferral program, according to the indictment.

He then thought of another tactic: blaming the banks for ignoring red flags as a way to extract a settlement and keep his company alive, prosecutors said.

In doing so, Chu compared Tricolor to Enron, the energy company that collapsed in 2001 after accounting fraud was discovered.

“Enron obviously has a good reputation, right?” Zhou said, according to the documents. “I mean, Enron, Enron raises a lender’s blood pressure when they see that.”