LOS ANGELES – James Arthur McDonald Jr., a 52-year-old former San Gabriel Valley resident and frequent guest on financial television news programs, has been arrested and is expected to face federal charges in this district for allegedly defrauding investors out of tens of millions of dollars.
McDonald, who was a CEO and chief investment officer of two companies – Hercules Investments LLC, based in downtown Los Angeles, and Index Strategy Advisors Inc. (ISA), based in Redondo Beach – was taken into custody on Saturday at a residence in Port Orchard, Washington, and will make his initial appearance today in United States District Court in Tacoma, Washington.
The former financial TV news analyst had been considered a fugitive since at least November 2021, when he failed to appear before the United States Securities and Exchange Commission to testify after allegations arose that he had defrauded investors. Prior to fleeing, McDonald also appeared to have terminated his previous phone and email accounts and told one person that he planned to “vanish,” according to court documents.
A federal grand jury in Los Angeles returned a seven-count indictment against McDonald in January 2023, charging him 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 indictment alleges that McDonald 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 U.S. presidential election.
According to the indictment, McDonald solicited millions of dollars’ worth of funds from investors in the form of a purported capital raise for Hercules but allegedly misrepresented how the funds would be used and failed to disclose the massive losses Hercules previously sustained. He allegedly obtained $675,000 in investment funds from one victim group on March 9, 2021, and misappropriated those funds in various ways, including spending roughly $174,610 of them at a Porsche dealership.
McDonald also allegedly falsely represented to clients that ISA, his other firm, was a registered investment adviser, even though he had withdrawn ISA as a state-registered investment adviser firm in May 2019. He will arrive in Los Angeles in the coming weeks to face federal charges in this district.
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Key Facts
- State: California
- Agency: DOJ USAO
- Category: Fraud & Financial Crimes
- Source: Official Source ↗
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