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Former CNBC guest financial analyst James Arthur McDonald Jr. was sentenced to five years in federal prison for defrauding investors out of millions of dollars, the U.S. Department of Justice announced in a press release shared on Monday (August 4).
McDonald, 53, a former resident of San Gabriel Valley, California, who served as the CEO and chief investment officer of Hercules Investments LLC and Index Strategy Advisors Inc., pleaded guilty to one count of securities fraud on April 7 and was sentenced by United States District Judge Dale S. Fischer, who will order restitution at a hearing scheduled for a later date, on Monday.
“To his victims, [McDonald] seemed to embody the American Dream,” prosecutors argued in a sentencing memorandum. “But looks can be deceiving, and as [McDonald’s] victims learned, their trust had been betrayed.”
McDonald was arrested at his Florida home in June 2024 after spending several years on the run, at which point he was extradited back to California. The former executive reportedly terminated a phone and email accounts told one individual that he intended to "vanish," according to court documents obtained by the New York Post.
McDonald reportedly “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" in 2020, according to prosecutors by misrepresenting how funds would be used and failed to disclose the "massive losses" sustained by Hercules.
“He misappropriated most of those funds in various ways, including spending $174,610 at a Porsche dealership and transferring $109,512 to the landlord of a home McDonald was renting in Arcadia,” the Justice Department said.
McDonald reportedly lost a total of $3 million of his Hercules clients' money, while having also sent ISA clients “false account statements, including for one client who invested approximately $351,000, later needed the money to make a down payment on a home, was informed by McDonald that much of the money had been lost, and never got his full investment back.”
McDonald reportedly “raised more than $5.1 million from 23 investors and clients, and misappropriated more than $2.9 million of those funds for personal expenses and Ponzi-like payments to earlier investors" in total, according to the U.S. Securities and Exchange Commission.