A former CNBC analyst who landed on the FBI's Most Wanted list for white-collar crimes was arrested this weekend after being accused of defrauding investors, federal prosecutors announced Monday.
James Arthur McDonald, 52, of California, was a frequent guest on CNBC and the CEO and chief investment officer of the companies Hercules Investments LLC and Index Strategy Advisors Inc.
According to a federal grand jury indictment, McDonald is alleged to have lost tens of millions of dollars in Hercules customers' money after taking a risky short position that “effectively gambled on the health of the U.S. economy in the aftermath of the U.S. presidential election.” end of 2020, Officials from the Ministry of Justice said this in a press release. The predicted market decline did not occur, causing customers to lose between $30 and $40 million.
McDonald's compensation from Hercules Investments was based primarily on a percentage of the assets he managed, prosecutors said, meaning the company's losses in light of McDonald's short positions “significantly reduced the fees he could collect” .
In early 2021, McDonald reportedly solicited millions of dollars in money from investors as part of a capital raise for Hercules Investments. He allegedly misrepresented how the funds would be used, telling investors he would be launching a mutual fund, and failed to disclose the investment company's losses from the previous year.
Federal Bureau of Investigation
He is said to have raised $675,000 from one victim group. McDonald spent $174,610 of that at a Porsche dealer; more than $100,000 was transferred to the landlord of a house McDonald was renting; and nearly another $7,000 was spent on a website selling designer men's clothing, prosecutors said.
McDonald also allegedly falsely represented clients at Index Strategy Advisors, sending clients there false account statements that misrepresented how much money was in their accounts.
McDonald became a fugitive in late 2021 when he failed to appear before the U.S. Securities and Exchange Commission, prosecutors said. McDonald had been called before the committee to testify following allegations that he had defrauded investors.
In September 2022, the SEC filed a civil complaint accusing McDonald and Hercules Investments of violating the federal securities law. The filing found that McDonald was liable for $3,810,346 in net profits earned due to alleged misconduct. a A federal arrest warrant was then issuedbut McDonald remained on the run.
According to court documents, McDonald allegedly told one person he planned to “disappear” and closed his phone and email accounts.
In January 2023, a federal grand jury in Los Angeles returned an indictment charging him with one count of securities fraud, one count of bank fraud, three counts of investment advisor fraud, and two counts of engaging in monetary transactions involving property resulting from illegal activities. .
Last weekend he was arrested by the FBI at a home in Port Orchard, Washington.
McDonald made his initial appearance in United States District Court in Tacoma, Washington, but will be brought to Los Angeles to face federal charges in the coming weeks.
If convicted, he faces a maximum sentence of 20 years in prison for each count of securities fraud and wire fraud, up to 10 years for the monetary transactions arising from unlawful activity, and an additional five years for the investment adviser charge. fraud.
