A former Arcadia resident who was a frequent guest on financial television news programs then became a fugitive from justice after being accused of defrauding investors agreed Wednesday to plead guilty to conning victims out of at least $2.7 million.
James Arthur McDonald Jr., 53, has agreed to plead guilty on a future date to one federal count of securities fraud, a felony that carries a sentence of up to 20 years in prison, according to the U.S. Attorney’s Office.
McDonald has been in federal custody since June 2024, when he was arrested in a residence in Port Orchard, Washington, after being a fugitive since November 2021, when he failed to appear before the U.S. Securities and Exchange Commission to testify after allegations arose that he had defrauded investors.
According to his plea agreement, filed Wednesday in L.A. federal court, at McDonald’s Washington state hideout, law enforcement found, among other things, a fake Washington, D.C., driver’s license bearing McDonald’s photograph and the name “Brian Thomas.”
According to the indictment, McDonald was the CEO and chief investment officer of two companies: Hercules Investments LLC, based in downtown Los Angeles, and Index Strategy Advisors Inc., based in Redondo Beach. He frequently appeared as an analyst on the CNBC financial television news network, prosecutors said.
In late 2020, McDonald lost tens of millions of dollars of Hercules client money after adopting a risky short position that effectively bet against the health of the U.S. economy in the aftermath of the presidential election. Prosecutors said McDonald projected that the COVID-19 pandemic and the election would result in major sell-offs that would cause the stock market to drop. When the market decline didn’t occur, Hercules clients lost between $30 million and $40 million. By December 2020, Hercules clients were complaining to company employees about the losses in their accounts, court papers show.
McDonald allegedly also falsely represented to clients that ISA, his other firm, was a registered investment adviser, even though he had withdrawn ISA as a state-registered investment adviser firm in May 2019. He allegedly sent ISA clients false account statements, including for one client who invested about $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, according to the U.S. Attorney’s Office.