JPMorgan Chase, Barclays, and Fifth Third are facing legal action from investors who incurred losses on securities issued by the now-bankrupt subprime auto lender, Tricolor. The lawsuit alleges that the banks overlooked significant warning signs while fraudulently marketing the debt. Tricolor provided auto loans primarily in lower-income Hispanic communities in the southwestern United States.
The complaint, filed in Manhattan federal court, represents holders of over $230 million of Tricolor asset-backed notes sold between April 2022 and June 2025. It accuses the banks of fuelling and perpetuating what it describes as Tricolor’s ‘Ponzi-like fraud’ by financing and securitising its auto loans, in addition to their roles as major lenders to Tricolor. Investors claim that the banks assured the notes were investment-worthy despite warnings from audits in 2022 and 2024, which revealed inaccurately reported loan receivables and cash flow irregularities.
The lawsuit further claims that the banks chose to conceal the issues rather than risk losses on their warehouse lines and forfeit millions in fees and income derived from Tricolor’s activities. Tricolor filed for liquidation under Chapter 7 of the U.S. Bankruptcy Code last September. JPMorgan, Barclays, and Fifth Third have reported losses linked to Tricolor. JPMorgan CEO Jamie Dimon previously acknowledged his bank’s exposure as ‘not our finest moment.’
Some of Tricolor’s notes are now trading at less than 10 cents on the dollar, and the plaintiffs estimate their potential losses could reach hundreds of millions of dollars. Among the 30 plaintiffs are funds run by Janus Henderson, Ellington Capital Management and One William Street Capital Management. JPMorgan, Barclays, and Fifth Third have declined to comment on the pending litigation.
