A California-based advisor and former frequent CNBC analyst is in custody after eluding legislation enforcement for greater than two years, based on the Justice Division.
James Arthur McDonald was arrested over the weekend in Port Orchard, Wash., about 15 miles outdoors Seattle. He made an preliminary courtroom look in Tacoma, Wash., and is anticipated to be transferred to Los Angeles to face federal costs within the subsequent few weeks.
In January 2023, a Los Angeles grand jury indicted him on one rely every of securities and wire fraud and three counts of funding adviser fraud. If convicted, he faces as much as 20 years in jail.
McDonald’s victims collectively misplaced between $30 million and $40 million, and he’s been a fugitive since late 2021, based on the DOJ.
McDonald was CEO and chief funding officer for 2 firms: Los Angeles-based Hercules Investments and Redondo Seaside-based Index Technique Advisors. He additionally continuously appeared as a market analyst on CNBC, together with on “Quick Cash” and “The Trade.” (In 2020, Hercules Investments received a WealthManagement.com Business Award within the class of Different Asset Administration.)
In late 2020, McDonald started shorting the U.S. financial system, betting the market would tank following the COVID-19 pandemic and that 12 months’s presidential election. However the market continued its climb in 2021, and Hercules shoppers misplaced thousands and thousands within the course of, based on the DOJ.
By the tip of 2020, Hercules shoppers observed the losses of their accounts, and since McDonald tied his charges to belongings beneath administration, these losses harm McDonald’s backside line. In 2021, McDonald went to Hercules traders, claiming he wished to boost capital for the agency and launch a mutual fund beneath the ticker “NFLHX” (McDonald was a giant soccer fan, based on the DOJ).
As a substitute, he used the funds he raised to pay down the losses the agency’s shoppers sustained—losses that threatened NFLHX’s success. Moreover, any litigation stemming from the losses would have to be disclosed to fund traders. McDonald additionally allegedly used among the funds for his personal ends; he raised about $675,000 from one sufferer group in March 2021 and spent about $174,610 of that cash at a Porsche dealership, $109,512 to hire a home in Arcadia, Calif., and $6,800 on designer menswear, based on the Justice Division.
Neither McDonald nor attorneys representing him might be reached for remark.
Moreover, over a number of years, McDonald raised $3.6 million through his different firm, Index Technique Advisors, however he spent greater than $1 million of that cash for his personal makes use of and greater than $2 million on funds to Hercules shoppers and agency bills, based on an SEC criticism filed in 2021.
McDonald continued sending ISA shoppers false account statements, however the SEC was closing in.
The fee contacted McDonald’s attorneys to schedule an interview in October 2021 and ultimately subpoenaed him. However McDonald allegedly informed his former romantic companion that he was not going to stay round and deliberate to “vanish,” based on FBI Agent Robert Chowthi.
In a felony criticism, Chowthi mentioned McDonald gave his former companion (named “D.J.” within the criticism) a laptop computer and mobile phone to secretly talk with the advisor, in addition to a thumb drive detailing which Hercules shoppers had been owed cash. One morning in fall 2021, D.J. awoke to search out McDonald gone, based on Chowthi, together with his telephone and electronic mail accounts deactivated.
In keeping with the DOJ, a federal decide discovered the advisor accountable for greater than $3.8 million in a parallel SEC motion.
