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CNBC Financial Analyst Turned Fugitive James Arthur McDonald Jr. Arrested by FBI After 3 Years on the Run
A former CNBC financial analyst and CEO turned fugitive, accused of defrauding millions from his investors following a “failed bet against” the U.S. economy in 2020, has been arrested after being on the run for nearly three years.
James Arthur McDonald Jr., 52, was arrested by the FBI in Port Orchard, Washington, on Saturday and will be extradited back to California to stand trial “in the coming weeks” for his alleged crimes, according to the United States Department of Justice.
McDonald has been on the run since November 2021 after failing to appear before the U.S. Securities and Exchange Commission to testify on charges of defrauding investors.
James Arthur McDonald Jr., 52, was arrested by the FBI in Port Orchard, Washington, on Saturday after being on the run for nearly three years. CNBC
He was the former CEO and chief investment officer of two Los Angeles financial firms: Hercules Investments LLC and Index Strategy Advisors Inc.
Along with his companies, McDonald “frequently appeared as an analyst on the financial television news network CNBC,” the DOJ said.
His troubles began in early 2020, when the former financial advisor allegedly lost “tens of millions of dollars in Hercules client money after taking a risky short position that effectively bet against the health of the U.S. economy following the U.S. presidential election.” USA”. according to the DOJ.
“McDonald projected that the COVID-19 pandemic and the election would result in massive sell-offs that would cause the stock market to decline.”
But when the market downturn never materialized, Hercules lost between “30 million and 40 million dollars” in client funds.
McDonald (C) frequently appeared as an analyst on the television financial news network CNBC. CNBC
In December 2020, investors began “complaining to company employees about losses on their accounts.”
Then, in January 2021, McDonald solicited millions of dollars in funds from investors to raise capital for Hercules, according to the DOJ.
To make matters worse, he allegedly “misrepresented how the funds would be used” and never revealed to investors “the enormous losses that Hercules had previously suffered.”
McDonald has been on the run since November 2021 after failing to appear before the U.S. Securities and Exchange Commission to testify on charges of defrauding investors. FBI
McDonald is also suspected of obtaining $675,000 in investment funds he raised from a group of victims, which he used to spend on himself – “spending approximately $174,610 of it at a Porsche dealership.”
According to the DOJ, he also allegedly transferred more than $100,000 of those funds to the owner of a home he was renting in Arcadia, California, and then another $6,800 to an online store to purchase designer clothing.
The alleged fraudster allegedly sent clients falsified account statements, “including from one client who invested approximately $351,000.”
He was the former CEO and chief investment officer of two Los Angeles financial firms: Hercules Investments LLC and Index Strategy Advisors Inc.
The DOJ reported that the client later asked for his money for a down payment on a home, but was told by McDonald “that much of the money had been lost and he never recovered his entire investment.”
In 2022, while on the run, a United States district judge found McDonald liable for $3,810,346, representing his net profits earned because of the alleged conduct, according to the SEC.
McDonald was charged with one count of securities fraud, one count of wire fraud, three counts of investment advisor fraud and two counts of engaging in monetary transactions in property derived from illegal activity.
The former CNBC financial analyst made his first court appearance on Monday in Tacoma, Washington, and is expected to be transported to Los Angeles in the coming weeks.
If found guilty, the alleged con artist could face up to 20 years in federal prison for each count of securities fraud and wire fraud, 10 years for each count relating to the use of investor funds for his benefit, and five years for a investment consultant.