*Former CNBC analyst James Arthur McDonald was arrested over the weekend after being charged with defrauding investors.
McDonald, a former frequent guest on CNBC and CEO of Hercules Investments LLC and Index Strategy Advisors Inc., ended up on the FBI’s Most Wanted list for white-collar crimes, CBS News reports.
Justice Department officials said in a news release: “In late 2020, McDonald lost tens of millions of dollars of Hercules client money after adopting a risky short position that effectively bet against the health of the United States economy in the aftermath of the U.S. presidential election. McDonald projected that the COVID-19 pandemic and the election would result in major selloffs that would cause the stock market to drop. When the market decline didn’t occur, Hercules clients lost between $30 million and $40 million. By December 2020, Hercules clients were complaining to company employees about the losses in their accounts.”
In early 2021, McDonald allegedly raised millions from investors for a capital raise, misrepresenting the use of funds and concealing the previous year’s losses. Per CBS News, he raised $675,000 from one group, spending $174,610 at a Porsche dealership, over $100,000 on rent, and nearly $7,000 on designer menswear. He also sent false account statements to clients of Index Strategy Advisors, misrepresenting their account balances.
McDonald became a fugitive in late 2021 when he failed to appear before the U.S. Securities and Exchange Commission (SEC) to respond to fraud allegations. A federal arrest warrant was issued, but McDonald evaded capture.
According to court documents, McDonald reportedly told someone he intended to “vanish” and subsequently closed his phone and email accounts.
In January 2023, a federal grand jury in Los Angeles indicted McDonald on multiple charges, including securities fraud, wire fraud, investment adviser fraud, and engaging in monetary transactions with unlawful funds.
The FBI arrested him over the weekend in Port Orchard, Washington. In the coming weeks, he will be transferred to Los Angeles to face federal charges.
If convicted, McDonald could face up to 20 years in prison for each count of securities and wire fraud, 10 years for monetary transactions for unlawful activity, and five years for investment adviser fraud, per CBS News.
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