Former CNBC pundit arrested by FBI after nearly three years on the run; James Arthur McDonald Jr. faces decades behind bars for fraud if convicted

Nearly three years after James Arthur McDonald Jr. walked away from a meeting with the SEC over allegations he defrauded millions of investors, the FBI arrested the former CNBC pundit over the weekend in the state of Washington.

Scheduled to appear in federal court in Tacoma, Wash., later today, the former CEO of Hercules Investments could face “a statutory maximum penalty of 20 years in federal prison for each count of securities fraud and fraud electronic,” according to the Department of Justice. Justice. McDonald also faces “up to 10 years in federal prison for monetary transactions arising from illegal activities, and up to five years in federal prison for investment advisor fraud,” according to the federal government.

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The office of U.S. Attorney for Central California Martin Estrada expects McDonald to be transferred to Los Angeles within the next month.

A longtime fixture as an analyst on CNBC over the years, McDonald has not been on the Comcast-owned media outlet since July 2021, when news of an investigation into his companies first became public. Subpoenaed by the SEC three years ago, the boss of Southern California-based Hercules Investments and Index Strategy Advisors was scheduled to appear before the Commission in early November 2021, but instead took a rider.

McDonald lost $30 million to $40 million for his investors after his assumption that the Covid-19 pandemic and the 2020 US election would cause stock markets to plummet proved far from reality. He used various financial sleight of hand to hide the losses from these investors. “McDonald engaged in a fraudulent scheme in which he defrauded investors in the ISA Fund by making and/or disseminating false and misleading statements, misused investors’ funds by using them to pay for his personal expenses, to pay Hercules’ customers and/or creditors and to pay Ponzi “like returns to investors,” noted a fraud suit filed against the self-described investment advisor more than two years ago.

Of the millions McDonald collected for his businesses, prosecutors alleged he took nearly $700,000 for his personal use, which appears to be just one case among many.

Personal use that included “spending approximately $174,610 at a Porsche dealership,” the DOJ outlined Monday in a reiteration of its civil complaint filed Sept. 22, 2020, against the then-hidden McDonald. “Approximately $109,512 was transferred to the owner of a home McDonald was renting in Arcadia; and approximately $6,800 was spent on a website that sells designer men’s clothing,” prosecutors said today.

Earlier this year, U.S. District Judge Percy Anderson ruled that McDonald was liable for $3,810,346. This is the figure the government estimates to be its “net profit” from the alleged fraudulent activity.

The FBI and IRS are still investigating the matter, and Assistant United States Attorney Alexander B. Schwab of the Corporate and Securities Fraud Strike Force is taking lead prosecution.

BTW – McDonald was arrested at a home in Port Orchard, WA. This former industrial sawmill town of fewer than 18,000 people is about an hour’s drive from Seattle. For you trivia fans, the increasingly expensive hamlet in the Pacific Northwest is the hometown of Riverdale’This is Madeleine Petsch.

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