Fugitive ex-CEO arrested on investor fraud charges

A former investment firm CEO who previously appeared as a paid CNBC contributor has been arrested on fraud charges after more than two years on the run. Securities and Exchange Commission investigation, Federal prosecutor Said.

Defendant James Arthur McDonald Jr. is accused of misrepresenting to investors how he would spend millions of dollars raised from them between 2019 and 2021, and also allegedly concealing “enormous losses” from investors by his companies. Hercules Investments LLC according to, Charged in U.S. District Court in Los Angeles.

McDonald’s arrest Saturday at a home in Port Orchard, Washington, came nearly two months after a federal judge found him civilly liable for more than $3.8 million in damages. SEC For violations of securities laws.

A judge in federal court in Tacoma, Washington, ordered the 52-year-old man held without bail Monday, citing him as a flight risk.

Within weeks, McDonald agreed to be extradited from Washington to Los Angeles to face charges of one count of securities fraud, one count of wire fraud, three counts of investment adviser fraud and two counts of engaging in financial transactions involving property derived from unlawful activities.

If convicted on either the securities fraud or wire fraud charges, he could face up to 20 years in prison.

“McDonald is also a paid contributor to CNBC and appeared on the network’s programs several times in late 2020 and 2021 to comment on a variety of topics ranging from stock recommendations based on companies expected to grow during and after the COVID-19 pandemic to the ‘disconnect between Main Street and Wall Street’ in terms of the market’s buoyancy despite the lingering challenges of the pandemic,” a 2022 affidavit from an FBI agent seeking McDonald’s arrest states.

The affidavit also said that McDonald frequently represented in his investment pitch materials that he had a bachelor’s degree in economics from Harvard University, when in fact he graduated from Harvard Extension School, a non-traditional university that doesn’t offer bachelor’s degrees in economics.

“McDonald’s transcript from Harvard Extension School lists ‘Social Science’ as his major and appears to have only one economics class out of 16 classes he took,” the affidavit states.

Hercules, one of two companies headed by McDonald, lost between $30 million and $40 million in client investments in late 2020 in risky short selling positions in which McDonald “effectively bet on the health of the U.S. economy following the U.S. presidential election,” the Los Angeles U.S. Attorney’s Office said in a press release.

McDonald’s bet would have paid off if the election had triggered “a massive sell-off that would have caused the stock market to fall,” according to a 2022 FBI affidavit, “but the market did not fall as McDonald expected.”

Of the $675,000 he collected from the group of victim investors, McDonald, 52, is accused of spending about $175,000 at a Porsche dealership, sending another $109,512 to a landlord he rented in California and spending about $6,800 on a website selling designer men’s clothing, according to the indictment.

McDonald fled in November 2021 after failing to show up to testify before the SEC about allegations that he misled investors by pitching them a plan to launch a mutual fund under the ticker symbol “NFLHX,” a reference to McDonald’s love of NFL football.

“Prior to his escape, McDonald appears to have deleted his previous phone and email accounts and told an individual he was planning to ‘disappear,'” prosecutors said.

McDonald is also accused of falsely representing to clients of his other firm, Index Strategy Advisors in Redondo Beach, that it was a registered investment adviser, even though the firm withdrew its registration as a state-registered investment adviser in May 2019.

“McDonald misappropriated ISA client funds and used them to pay his own personal expenses, to make payments to Hercules clients and creditors, and to pay Ponzi-style profits to investors, creating the false impression that ISA was a successful company,” the indictment states.

“McDonald’s falsely represented to ISA clients that their funds were held in personal accounts; however, Defendant McDonald’s commingled ISA client funds with Hercules client funds and personal funds.”

Prosecutors said ISA clients invested around $351,000 and later “needed the money for a down payment on a house but were told by McDonald that most of the money had been lost and they would never get back the full amount they had invested.”