A former financial television news analyst, James Arthur McDonald Jr., has agreed to plead guilty to securities fraud. The 53-year-old, previously residing in Arcadia, California, was accused of defrauding investors out of at least $2.7 million. This felony carries a potential maximum sentence of 20 years in federal prison.
McDonald has been in custody since June 2024 following his arrest in Port Orchard, Washington. He had been a fugitive since November 2021 after failing to appear before the United States Securities and Exchange Commission (SEC) for testimony related to investor fraud allegations.
During his time as CEO and chief investment officer of Hercules Investments LLC and Index Strategy Advisors Inc. (ISA), both based in Los Angeles, McDonald frequently appeared on CNBC as an analyst. In late 2020, he lost tens of millions from Hercules clients due to a risky short position betting against the U.S. economy post-presidential election and pandemic effects. When the anticipated market decline did not occur, clients faced losses between $30 million and $40 million.
In early 2021, McDonald solicited funds under false pretenses for Hercules without disclosing previous losses. On March 9, 2021, he misappropriated most of the $675,000 obtained from one investor group by spending it on personal luxuries such as cars and rent.
Additionally, McDonald defrauded ISA clients by using less than half of the raised $3.6 million for trading purposes while commingling client funds with his own for personal expenses and Ponzi-like payments.
The FBI and IRS Criminal Investigation are handling this case. The SEC filed a civil complaint against McDonald and Hercules in September 2022 for federal securities law violations. By April 2024, Judge Percy Anderson ordered them to pay several million dollars in disgorgement and penalties.
Assistant United States Attorneys Alexander B. Schwab and Nisha Chandran are prosecuting the case.