Nearly three years since James Arthur McDonald Jr. bailed on a meeting with SEC over allegations of defrauding investors for millions, the FBI picked up the former CNBC pundit in Washington state this weekend.
Set to appear in federal court in Tacoma, WA later today, the one-time Hercules Investments CEO could be looking at “a statutory maximum sentence of 20 years in federal prison for each securities fraud and wire fraud count,” according to the Department of Justice. McDonald is also facing “up to 10 years in federal prison on the monetary transactions derived from unlawful activity count, and up to five years in federal prison on the investment adviser fraud count,” the feds say.
The office of U.S. Attorney for Central California Martin Estrada expects McDonald to be moved down to LA within the next month.
A perennial presence as an analyst on CNBC shows over the years, McDonald has not been on the Comcast-owned outlet since July 2021 when news of a probe into his companies first became public. Subpoenaed by the SEC three years ago, the Southern California-based Hercules Investments and Index Strategy Advisors boss was scheduled to appear before the Commission in early November 2021, but instead took a runner.
McDonald lost $30 to $40 million for his investors after his premise that the Covid-19 pandemic and the 2020 US election would result in a stock market plunge proved wide of the mark. Losses he used various financial sleights of hand to hide from those investors. “McDonald engaged in a scheme to defraud whereby he defrauded ISA Fund investors by making and/or disseminating false and misleading statements, misused investor funds by using them to pay his personal expenses, to pay Hercules clients and/or creditors, and to pay Ponzi-like returns to investors,” noted a fraud action brought against the self-described investment advisior over two years ago.
Of the millions McDonald raised for his companies, prosecutors alleged that he took almost $700,000 for personal use in what seems to be one instance of many.
Personal use that included “spending roughly $174,610 of them at a Porsche dealership,” the DOJ laid out Monday in a reiteration of their September 22, 2020 civil complaint filing against the then hidden McDonald. “Approximately $109,512 was transferred to the landlord of a home McDonald was renting in Arcadia; and approximately $6,800 was spent on a website that sells designer menswear,” prosecutors stated today.
Earlier this year, U.S. District Judge Percy Anderson ruled McDonald was liable for $3,810, 346, That’s the figure the government estimate is his “net profit” from the alleged fraud activity.
The FBI and the IRS are still investigating the matter, with Assistant U.S. Attorney Alexander B. Schwab of the Corporate and Securities Fraud Strike Force taking point on the prosecution.
BTW – McDonald was nabbed at a house in Port Orchard, WA. The once sawmill factory town of under 18,000 residents is about an hour’s drive from Seattle. For you trivia fans, the increasingly pricey Pacfic Northwest hamlet is the hometown of Riverdale‘s Madelaine Petsch.
