CNBC financial analyst turned fugitive from the law arrested by FBI

Allegedly stole client funds, hid massive company losses

A Los Angeles County investment consultant and frequent CNBC guest has been arrested after nearly three years on the run.

James Arthur McDonald Jr., 52, formerly of Arcadia, was arrested over the weekend in Port Orchard, Washington, according to the U.S. Department of Justice.

McDonald was identified by the DOJ as CEO and chief investment officer of two Los Angeles-area companies, downtown-based Hercules Investments LLC and Redondo Beach-based Index Strategy Advisors Inc.

McDonald has been on the run from the law since November 2021, when he failed to appear before the U.S. Securities and Exchange Commission to testify on charges of defrauding investors.

Before fleeing, McDonald allegedly deleted all of his phone and email accounts and told one person he planned to “disappear,” charging documents state.

In January 2020, he was indicted by a federal grand jury on seven counts, including wire fraud, securities fraud and investment advisor fraud.

An FBI wanted flier shows James Arthur McDonald Jr., accused of securities fraud.

According to charging documents, McDonald lost tens of millions of dollars belonging to Hercules clients after taking a “risky short position that effectively bet against the health of the United States economy in the aftermath of the US presidential election.”

McDonald predicted that the COVID-19 pandemic and the election would lead to massive sell-offs that would send the stock market crashing. When the decline never occurred, its clients lost between $30 and $40 million, the DOJ alleges.

In early 2021, he solicited millions of dollars in funds from investors to raise capital for Hercules, but allegedly “misrepresented how the funds would be used and failed to disclose the huge losses Hercules previously suffered,” the DOJ said.

As part of these efforts, he raised approximately $675,000 in investment funds from a group of victims and allegedly used much of the money for himself, spending more than $174,000 at a Porsche dealership, transferring approximately $ 110 thousand to his landlord for the house he was renting. Arcadia and about $6,800 on a website that sells designer men’s clothing.

He also allegedly sent falsified account statements to clients, including to a man who invested more than $350,000. When the client went to withdraw some of his money for a down payment on a house, he was informed by McDonald that much of the money had been lost. The client never recovered its entire investment, the DOJ said.

McDonald was taken into custody on Saturday and was scheduled to make his first appearance in federal court on Monday. He is expected to be transported to Los Angeles in the coming weeks.

If convicted on all counts, he could face a maximum sentence of 20 years in federal prison for each count of securities fraud and wire fraud, up to 10 years in federal prison for each count related to the use of investor funds in his self-benefit and up to five years in federal prison for one count of investment adviser fraud.

The SEC previously filed a civil complaint that accused McDonald and Hercules of violating federal securities law. In April, a U.S. district judge found McDonald liable for more than $3.8 million, representing net profits made from his alleged misconduct.

The case remains under investigation by the FBI and the IRS.

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