Federal prosecutors announced on Monday that a former CNBC analyst, who was once on the FBI’s Most Wanted list for white-collar crimes, has been arrested over the weekend. The charges against him include defrauding investors.
James Arthur McDonald, aged 52 and hailing from California, was a regular guest on CNBC. He held the position of CEO and chief investment officer in companies such as Hercules Investments LLC and Index Strategy Advisors Inc.
Related posts
In a news release by the Justice Department officials, it was revealed that McDonald, as per the indictment from a federal grand jury, had allegedly lost tens of millions of dollars of Hercules client money. This happened after he adopted a risky short position that effectively placed a bet against the health of the United States economy in the aftermath of the U.S. presidential election in late 2020. Unfortunately, the predicted market decline didn’t occur, leading to clients losing between $30 and $40 million.
According to prosecutors, Hercules Investments compensated McDonald based on a percentage of assets under his management. As a result, McDonald’s ability to collect fees was greatly reduced due to the losses incurred by the company in light of his short positions.
During the beginning of 2021, McDonald was accused of requesting millions of dollars from investors for a capital raise of Hercules Investments. As per allegations, he provided false information on how the funds would be utilized and failed to disclose the investment firm’s losses from the previous year while assuring investors that he would initiate a mutual fund.
According to prosecutors, McDonald is said to have collected $675,000 from a group of victims. Shockingly, he spent $174,610 of that amount at a Porsche dealership. In addition, he transferred over $100,000 to his landlord, who owned the home he was renting. Finally, the accused also allegedly spent almost $7,000 on a website that sold designer menswear.
According to reports, McDonald is accused of misrepresenting clients to Index Strategy Advisors and providing them with falsified account statements that misrepresented the actual amount of money in their accounts.
According to prosecutors, McDonald was accused of defrauding investors and became a fugitive in late 2021 after failing to appear before the United States Securities and Exchange Commission for his testimony.
The SEC brought a civil complaint against McDonald and Hercules Investments in September 2022, accusing them of violating federal securities law. As per the complaint, McDonald has been held accountable for $3,810,346 in net profits due to alleged misconduct. Subsequently, a federal arrest warrant was issued, but McDonald has been on the run ever since.
According to court documents, McDonald reportedly shared with one individual his intention to “vanish.” He subsequently closed down his phone and email accounts.
In January 2023, he faced serious charges as a federal grand jury in Los Angeles accused him of several counts, including securities fraud, wire fraud, investment adviser fraud, and engaging in monetary transactions in property derived from unlawful activity.
The FBI apprehended him at a residence in Port Orchard, Washington over the weekend.
In his debut appearance, McDonald appeared in the United States District Court in Tacoma, Washington. However, he will soon be transported to Los Angeles to confront federal charges in the coming weeks.
In case of conviction, he could potentially receive a maximum sentence of 20 years in federal prison for every count of securities fraud and wire fraud. Moreover, he might face up to 10 years of imprisonment for the monetary transactions related to unlawful activities. Additionally, he could be sentenced to another five years for investment advisor fraud.
