A former Arcadia resident who made regular appearances as a financial analyst on CNBC was accused Wednesday of lying to investors about the health of his financial company and failing to disclose massive investment losses. risky after the onset of the COVID-19 pandemic.
James Arthur McDonald Jr., 50, who is believed to be in hiding, has been charged with a single count of securities fraud, according to the U.S. Attorney’s Office.
McDonald was the CEO of Los Angeles-based Hercules Investments and Redondo Beach-based Index Strategy Advisors Inc., prosecutors said.
According to the U.S. Attorney’s Office, McDonald’s Hercules customers lost between $30 million and $40 million as a result of its failed ‘short’ investment predicting the stock market would suffer a major crash after the pandemic began and the unrest of the 2020 presidential. election.
Unable to collect fees from customers due to the large losses, McDonald’s began seeking more investment in early 2021, but reportedly misrepresented how the money would be spent and failed to disclose the massive losses suffered by Hercules due to its failure. year.
Prosecutors say McDonald obtained a $675,000 investment from a group of victims in March 2021, but he allegedly misused those funds, including spending $174,000 at a Porsche dealership, sending $109,000 to the owner of the house he was renting in Arcadia and spending $6,800 on a men’s clothing site.
Prosecutors also allege he falsely told clients that his company Index Strategy Advisors was a registered investment adviser, which it had not been since 2019. He also allegedly sent clients of this company false statements. of account. Prosecutors said one such client invested $351,000 in the business, but when the investor tried to access the money to buy a home, the person learned the money had been lost. .
McDonald was subpoenaed to testify before the United States Securities and Exchange Commission in November 2021, but he did not appear. Prosecutors said he disconnected his phone lines and terminated his email accounts, and allegedly told a person he planned to “disappear”.
The securities fraud charge carries a sentence of up to 20 years in federal prison.