https://ktla.com/news/local-news/former-cnbc-financial-analyst-conned-investors-out-of-3-million/

A former CNBC financial pundit from Los Angeles County pleaded guilty to defrauding his investors out of millions of dollars, officials announced Wednesday.

The Department of Justice said James Arthur McDonald Jr., 52, formerly of Arcadia, was the CEO and chief investment officer of two companies headquartered in Los Angeles: Hercules Investments LLC, based in downtown, and Index Strategy Advisors Inc., based in Redondo Beach.

According to charging documents, McDonald lost tens of millions of dollars belonging to clients of Hercules in late 2020 after he adopted a “risky short position that effectively bet against the health of the United States economy in the aftermath of the U.S. presidential election.”

McDonald predicted that the COVID-19 pandemic and the election would lead to major selloffs that would cause the stock market to drop.

The DOJ alleged that when the decline never came, his clients lost between $30 and $40 million.

In early 2021, McDonald solicited millions of dollars worth of investor funds to raise capital for Hercules, but allegedly “misrepresented how the funds would be used and failed to disclose the massive losses Hercules previously sustained,” the DOJ said.

McDonald raised about $675,000 in investment funds from one victim group. He spent more than  $174,000 of this money at a Porsche dealership and transferred about $110,000 to his landlord for the home he was renting in Arcadia. He also spent about $6,800 on a website that sells designer menswear.

“McDonald also defrauded clients of ISA, his other firm, using less than half of the approximately $3.6 million he raised for trading purposes,” added the DOJ. “In total, McDonald caused losses of between approximately $2,745,892 and approximately $3,025,892, according to his plea agreement.”

McDonald became a fugitive of law in November 2021 when he failed to appear before the United States Securities and Exchange Commission to testify regarding accusations of defrauding investors.

Before fleeing, McDonald allegedly deleted all his phone and email accounts and told one person that he planned to “vanish,” charging documents state.

He remained a fugitive until the FBI arrested him in June 2024, finding him in a hideout in Port Orchard, Washington.

At this hideout, the DOJ said law enforcement found a fake Washington, D.C., driver’s license with McDonald’s photograph and the name “Brian Thomas.”

On Feb. 19, the DOJ announced McDonald agreed to plead guilty to one count of securities fraud, a felony with a statutory maximum sentence of 20 years in federal prison.