Sunday, December 22, 2024

CNBC financial analyst-turned-fugitive arrested by FBI after 3 years on the run

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A former CNBC financial pundit and CEO-turned-fugitive accused of defrauding millions from his investors following a failed “bet against” the US economy in 2020 has been nabbed after being on the run for nearly three years.

James Arthur McDonald Jr., 52, was arrested by the FBI in Port Orchard, Wash., 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 had been a fugitive since November 2021 after he failed to appear before the United States Securities and Exchange Commission to testify regarding accusations of defrauding investors.

James Arthur McDonald Jr., 52, was arrested by the FBI in Port Orchard, Wash., on Saturday after being on the run for nearly three years. CNBC

He was the former CEO and chief investment officer for two Los Angeles financial companies: Hercules Investments LLC and Index Strategy Advisors Inc.

Along with his companies, McDonald “frequently appeared as an analyst on the CNBC financial television news network,” the DOJ reported.

His troubles began in early 2020 when the former financial adviser reportedly 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 US presidential election,” according to the DOJ.

“McDonald projected that the COVID-19 pandemic and the election would result in major selloffs that would cause the stock market to drop.”

But, when the market downturn never came to fruition, Hercules lost between “$30 million and $40 million” of clients’ funds.

McDonald (C) frequently appeared as an analyst on the CNBC financial television news network. CNBC

By December 2020, investors began “complaining to company employees about the losses in their accounts.”

Then, in January 2021, McDonald solicited millions of dollars worth of funds from investors to raise capital for Hercules, according to the DOJ.

Making matters worse, he allegedly “misrepresented how the funds would be used” and never disclosed to investors “the massive losses Hercules previously sustained.”

McDonald had been a fugitive since November 2021 after he failed to appear before the United States Securities and Exchange Commission to testify regarding accusations of defrauding investors. FBI

McDonald is also suspected of obtaining $675,000 in investment funds he raised from one victim group, which he used to splurge on himself — “spending roughly $174,610 of them at a Porsche dealership.”

According to the DOJ, he also allegedly transferred over $100K of those funds to the landlord of a home he was renting in Arcadia, California, and then another $6,800 to an online store to buy designer clothing.

The alleged fraudster reportedly sent clients falsified account statements, “including for one client who invested approximately $351,000.”

He was the former CEO and chief investment officer for two Los Angeles financial companies: Hercules Investments LLC and Index Strategy Advisors Inc. Hercules Investments

The DOJ reported that the client later asked for his money to make a down payment on a home but was told by McDonald “that much of the money had been lost, and he never got his full investment back.”

In 2022, while on the lam, a United States District Judge found McDonald liable for $3,810,346, representing his net profits gained because of the alleged conduct, according to the SEC.

McDonald has been 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 unlawful activity.

The former CNBC financial analyst made his initial court appearance on Monday in Tacoma, Wash., 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 securities fraud and wire fraud count, 10 years for each count related to using investor funds for his benefit, and five years for one investment adviser fraud.

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