Former CNBC financial analyst finally arrested by FBI after 3 years on the loose

After three years on the run, 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, Wash., and is expected to make his initial appearance today in U.S. District Court in Tacoma, Washington. He will arrive in Los Angeles in the coming weeks to face federal charges in that district,” according to the U.S. Department of Justice.

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

A former financial TV news analyst turned fugitive accused of defrauding investors. James Arthur McDonald Jr., 52, was arrested Saturday at a residence in Port Orchard, WA and will face federal charges in Los Angeles. https://t.co/yUN0PO66ZZ pic.twitter.com/YnJh8SMmlg

— FBI Seattle (@FBISeattle) June 18, 2024

“In late 2020, McDonald's lost tens of millions of dollars of Hercules customers' money after taking a risky short position that effectively bet against the health of the US economy after the US presidential election .McDonald projected that the COVID-19 pandemic and the election would result in large sales that would send the stock market crashing. When the market crash didn't happen, Hercules customers lost between $30 million and $40 million. . DOJ Press release.

“In December 2020, Hercules customers complained to company employees about losses on their accounts,” he continued.

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

He allegedly raised $675,000 in investment funds from a group of victims, but ended up “spending approximately $174,610 of that at a Porsche dealership.” Court documents also showed he used those funds to pay thousands to “the owner of a house McDonald was renting in Arcadia” and to an online store to buy designer men's clothing.

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

McDonald falsely told its clients that Index Strategy Advisors “was a registered investment adviser, even though it had withdrawn from ISA as a state-registered investment advisory firm in May 2019,” the statement from press

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

According to court documents, the former CNBC analyst “appeared to have canceled his previous phone and email accounts and told one person he planned to 'disappear,'” 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 illegal activities,” the DOJ reported.

McDonald is presumed innocent unless proven guilty beyond a reasonable doubt in a court of law. However, if convicted on all counts, 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 for the monetary transactions resulting from illegal activities , and up to five years in federal prison on the investment adviser fraud count,” according to the DOJ.

Senior Staff Writer
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Originally from New York, Powers graduated from New York University and eventually made her way to sunny South Florida, where she has been writing for the BizPacReview team since 2015.

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