Former CNBC Analyst Pleads Guilty to $2.7 Million Securities Fraud Scheme
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James Arthur McDonald Jr., a former financial advisor and frequent CNBC guest analyst, has agreed to plead guilty to securities fraud, admitting to defrauding investors out of at least $2.7 million, as reported by ThinkAdvisor. The felony charge carries a maximum sentence of 20 years in federal prison.
As CEO and chief investment officer of Los Angeles-based Hercules Investments LLC and Index Strategy Advisors Inc. (ISA), McDonald managed investor funds and frequently appeared on CNBC as an analyst. ThinkAdvisor reports that, in late 2020, he adopted a risky short position, betting against the U.S. economy in the aftermath of the presidential election. His prediction of a stock market collapse did not materialize, resulting in investor losses between $30 million and $40 million.
In early 2021, McDonald sought to raise capital for Hercules, misleading investors about the firm’s financial state and the intended use of funds. According to ThinkAdvisor, he secured $675,000 from one investor group but misappropriated the majority of the money, spending $174,610 at a Porsche dealership and transferring $109,512 to his landlord to cover rent on his Arcadia, California, home.
McDonald also defrauded clients of ISA, raising approximately $3.6 million but using less than half for trading. Instead, he commingled client funds with his personal bank account to pay for luxury cars, rent, personal expenses, and Hercules’ operating costs. He also engaged in Ponzi-like payments, using new investor funds to pay earlier clients, according to AdvisorHub. Prosecutors estimate that ISA clients suffered losses between $2.75 million and $3 million.
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