A former television financial analyst and investment firm executive, James Arthur McDonald Jr., has been sentenced to five years in prison for defrauding investors of millions of dollars, the United States Department of Justice has announced.
McDonald, 53, who previously appeared as a guest analyst on CNBC, pleaded guilty to securities fraud in April and is expected to pay restitution to victims of the scheme.
According to court documents, McDonald served as Chief Executive Officer and Chief Investment Officer of Los Angeles-based Hercules Investments LLC and Index Strategy Advisors Inc.
He misrepresented investment strategies and concealed substantial losses incurred by Hercules in 2020, following a failed bet against the U.S. economy after the presidential election.
Prosecutors revealed that McDonald raised over $5.1 million from 23 investors but misappropriated more than $2.9 million for personal use, including luxury purchases and rental payments. Notably, he spent $174,610 at a Porsche dealership and transferred $109,512 to a landlord for a residence in Arcadia, California.
The Justice Department stated that McDonald sent false account statements to clients and used funds in a Ponzi-like manner to repay earlier investors. One client who invested $351,000 was unable to recover the full amount after requesting the funds for a home purchase.
McDonald fled in 2021, terminating his communications and evading a subpoena from the U.S. Securities and Exchange Commission. He was arrested in June 2024 at a residence in Florida and extradited to California.
A restitution hearing is scheduled to determine compensation for affected investors.
