* Investors say banks stuck heads in the sand, ignored

Tricolor audits

* Tricolor notes fell below 10 cents on the dollar,

investors say

* Two Tricolor executives pleaded not guilty in criminal

cases

* Banks not available for comment or declined to comment

By Jonathan Stempel

NEW YORK, June 10 (Reuters) - JPMorgan Chase ( JPM ),

Barclays ( BCS ) and Fifth Third won the dismissal of

a lawsuit by investors who said the banks missed "giant red

flags" at the now-bankrupt subprime auto lender Tricolor while

fraudulently marketing its debt.

U.S. District Judge Jed Rakoff in Manhattan threw out the

case on Wednesday, and said he will explain his reasoning in due

course.

Holders of more than $270 million in Tricolor asset-backed notes

sold between April 2022 and June 2025 accused the banks of

"sticking their heads in the sand" while financing and

securitizing Tricolor's auto loans, on top of being major

Tricolor lenders, and enabling the company's "Ponzi-like fraud."

The 36 plaintiffs included funds run by Janus Henderson ( JHG )

, Ellington Capital Management and One William Street

Capital Management.

Barclays ( BCS ) and Cincinnati-based Fifth Third declined to comment.

JPMorgan ( JPM ) had no immediate comment.

Tricolor provided auto loans primarily in lower-income Hispanic

communities in the southwestern U.S., before filing to liquidate

in September.

The filing came 18 days before a large auto parts supplier,

First Brands, sought Chapter 11 protection from creditors.

Both bankruptcies highlighted the risk of private credit,

where investors provide capital to businesses that receive less

regulatory oversight than businesses tapping public markets.

Investors accused JPMorgan ( JPM ), Barclays ( BCS ) and Fifth Third of

falsely assuring that Tricolor notes were worth buying, even as

audits in 2022 and 2024 revealed that Tricolor inaccurately

reported loan receivables and either misdirected or "made up"

cash flow.

Some notes ended up trading below 10 cents on the dollar,

the investors said.

In seeking a dismissal, the banks said the investors "at

most" alleged negligence rather than intent to defraud. They

also said claims they "failed to stop" fraud sooner have never

justified securities fraud claims in New York federal courts.

All three banks have reported nine-figure losses from

Tricolor.

In December, Tricolor Chief Executive Daniel Chu and former

Tricolor Chief Operating Officer David Goodgame were indicted in

Manhattan for allegedly systematically defrauding creditors and

lenders, including by falsifying loan data and double-pledging

collateral. Both pleaded not guilty.