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James Arthur McDonald Jr. is a frequent guest on national television news programs that became a fugitive after being accused of investor fraud, and will spend the next five years in prison.
The 53-year-old had previously pleaded guilty to a one-count securities fraud earlier this year.
The US Lawyer’s Office for the Central District of California issued a media release Monday, outlining the actions of Hercules Investments, LLC and Index Strategy Advisors, CEOs and major investments of two LA-based companies.
Additionally, he “appeared frequently” as an analyst for financial news station CNBC, prosecutors said.
“In the second half of 2020, McDonald lost tens of millions of dollars of Hercules client money after adopting a risky short position that effectively bets on the health of the US economy in the aftermath of the US presidential election,” the lawyers’ firm explained in a media release. “McDonald predicted that the Covid-19 pandemic and elections would lead to massive stock market sales that would lower. When the market declined, Hercules clients lost between $30 million and $40 million.”
“By December 2020, Hercules clients had complained to company employees about the loss of their accounts,” the release continued.
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By early 2021, McDonald, who once lived in San Gabriel Valley, had sought millions of dollars worth of funds from investors in the form of “capitalized” of the Hercules Company. However, he misrepresented where those funds were heading, and did not reveal the great losses sustained by Hercules.
James Arthur McDonald Jr. can be seen in photos released by the FBI.
An example of this activity occurred on March 9, 2021, when McDonald’s acquired a $675,000 investment fund from one victim group. Later he used the money in other ways, spending $174,610 at a Porsche dealer and handing over $109,512 to the Arcadia landlord who owed him $109,512.
He said that Hercules’ clients were not the only ones affected as McDonald also scamed the Index Strategy Advisor (ISA) client. He is said to have used less than half of the roughly $3.6 million raised for the purpose of the transaction.
He then used the money to buy a luxury car and paid the Hercules Company rent, credit card bills and operating expenses. These funds were also used to “pay Ponzi-like” to ISA clients.
“In total, prosecutors allege that McDonald caused more than $3 million in losses to the victim,” the official said.
McDonald was called to testify against the U.S. Securities and Exchange Commission in 2021, but was unable to appear. He ran for almost three years before being arrested just outside Seattle in June 2024 in Port Orchard, Washington. He has since protected federal custody.
The FBI wanted flyer shows James Arthur McDonald Jr., accused of securities fraud.
In McDonald’s Washington State hideaway, law enforcement discovered, among other things, a fake Washington DC, a photo of McDonald, a driver’s license named “Bryan Thomas.”
The SEC filed a civil complaint against McDonald’s and Hercules Investments, LLC in September 2022, accusing him of violating federal securities laws. The judge discovered that both parties were liable and ordered them to pay millions of dollars of disgust and civil penalty.
There is no date for the McDonald’s reparation hearing.
Adjutant Alexander B. Schwab, deputy chief of the criminal division, and assistant assistant Nisha Chandra, principal fraud division, have indicted the case.
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