Former CNBC financial analyst finally arrested by FBI after being on the lam for 3 years

After three years as a fugitive, a former financial television analyst accused of defrauding investors was arrested by the FBI.

“James Arthur McDonald Jr., 52, formerly of Arcadia, was arrested Saturday at a residence in Port Orchard, Washington, and is expected to make his initial appearance today in United States District Court in Tacoma, Washington. He will arrive in Los Angeles in the coming weeks to face federal charges in this district,” according to the United States Department of Justice.

A frequent guest as an analyst on CNBC and financial television news programs, McDonald was the CEO and chief investment officer of Hercules Investments LLC, based in downtown Los Angeles, and the Redondo Beach-based company, Index Strategy Advisors Inc. (ISA).

“In late 2020, McDonald lost tens of millions of dollars of Hercules client money after adopting a risky short position that effectively bet against the health of the United States economy in the aftermath of the U.S. presidential election. McDonald projected that the COVID-19 pandemic and the election would result in major selloffs that would cause the stock market to drop. When the market decline didn’t occur, Hercules clients lost between $30 million and $40 million,” the DOJ press release noted.

“By December 2020, Hercules clients were complaining to company employees about the losses in their accounts,” it continued.

To raise capital for Hercules, McDonald then solicited millions from investors in January 2021, and allegedly “misrepresented how the funds would be used,” never revealing to investors “the massive losses Hercules previously sustained.”

He allegedly raised $675,000 in investment funds from one victim group, but ended up “spending roughly $174,610 of them at a Porsche dealership.” Court documents also showed that he used those funds to pay thousands to the “landlord of a home McDonald was renting in Arcadia,” and on an online store to buy men’s designer clothing.

“He also allegedly sent ISA clients false account statements, including for one client who invested approximately $351,000, later needed the money to make a down payment on a home, was informed by McDonald that much of the money had been lost, and never got his full investment back,” according to the DOJ.

McDonald falsely told clients that Index Strategy Advisors “was a registered investment adviser, even though he had withdrawn ISA as a state-registered investment adviser firm in May 2019,” the press release noted.

McDonald’s days as a fugitive reportedly began in November 2021 after failing to appear before the United States Securities and Exchange Commission. He had been scheduled to testify on the allegations of his alleged fraud.

According to court documents, the former CNBC analyst “appeared to have terminated his previous phone and email accounts and told one person that he planned to ‘vanish,'” the DOJ press release noted.

In January 2023, a federal grand jury in Los Angeles “returned a seven-count indictment against McDonald. He is charged with one count of securities fraud, one count of wire fraud, three counts of investment adviser fraud, and two counts of engaging in monetary transactions in property derived from unlawful activity,” the DOJ reported.

McDonald is presumed innocent unless proven guilty beyond a reasonable doubt in a court of law. However, if he is convicted of all charges, he faces a maximum of 20 years in federal prison “for each securities fraud and wire fraud count, up to 10 years in federal prison on the monetary transactions derived from unlawful activity count, and up to five years in federal prison on the investment adviser fraud count,” according to the DOJ.

Frieda Powers

Comment

We have no tolerance for comments containing violence, racism, profanity, vulgarity, doxing, or discourteous behavior. If a comment is spam, instead of replying to it please click the ∨ icon below and to the right of that comment. Thank you for partnering with us to maintain fruitful conversation.

Latest Articles