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

A former CNBC analyst who ended up on the FBI’s most wanted list for white-collar crimes was arrested over the weekend after being accused of defrauding investors, federal prosecutors announced Monday.

James Arthur McDonald, 52, of California, was a frequent guest on CNBC and CEO and chief investment officer of Hercules Investments LLC and Index Strategy Advisors Inc.

According to a federal grand jury indictment, McDonald allegedly lost tens of millions of dollars in Hercules customer money after taking a short and risky position that “effectively bet against the health of the United States economy following the U.S. presidential election.” USA” at the end of 2020, Justice Department officials said in a press release. The predicted market decline did not happen, causing customers to lose between $30 and $40 million.

McDonald’s compensation from Hercules Investments was based primarily on a percentage of the assets he managed, prosecutors said, meaning the company’s losses in light of McDonald’s short positions “significantly diminished the fees” he was able to charge.

In early 2021, McDonald reportedly solicited millions of dollars in funds from investors as part of a capital raise for Hercules Investments. He allegedly misrepresented how the funds would be used, telling investors he would launch a mutual fund, and failed to disclose the investment company’s losses from the previous year.

He allegedly collected $675,000 from a group of victims. McDonald spent $174,610 of that amount at a Porsche dealership; more than $100,000 was transferred to the owner of a home McDonald was renting; and nearly another $7,000 was spent on a website selling designer men’s clothing, prosecutors said.

McDonald also allegedly falsely represented clients to Index Strategy Advisors and sent clients false account statements that misrepresented how much money was in their accounts.

McDonald became a fugitive in late 2021 when he failed to appear before the U.S. Securities and Exchange Commission, prosecutors said. McDonald was called before the commission to testify in response to allegations that he had defrauded investors.

In September 2022, the SEC filed a civil lawsuit accusing McDonald and Hercules Investments of violating federal securities law. The lawsuit concluded that McDonald was responsible for $3,810,346 in net profits made due to the alleged misconduct. A federal arrest warrant was then presentedbut McDonald continued to flee.

McDonald allegedly told one person he planned to “disappear,” according to court documents, and closed his phone and email accounts.

In January 2023, a federal grand jury in Los Angeles returned an indictment charging him 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 properties derived from illegal activities. .

Over the weekend, he was arrested by the FBI at a home in Port Orchard, Washington.

McDonald made his initial appearance in U.S. District Court in Tacoma, Washington, but will be flown to Los Angeles to face federal charges in the coming weeks.

If convicted, he faces a maximum penalty of 20 years in federal prison on each count of securities fraud and wire fraud, up to 10 years on the monetary transactions derived from illegal activity and up to an additional five years on the investment consultant count. fraud.