James McDonald Jr. allegedly ran his investment firms like a Ponzi scheme and used the money to fund his lifestyle. He was arrested after 3 years on the run. (FBI)
Authorities arrested a 52-year-old money manager and CNBC commentator who was on the lam for three years after he allegedly lost investors $40 million on the fanciful idea that the economy would crash following the 2020 presidential election.
Police took James Arthur McDonald Jr. into custody over the weekend at a home in Port Orchard, Washington, the U.S. Attorney’s Office for the Central District of California said in a press release. McDonald, formerly of California, had been a fugitive ever since he skipped an appearance before the United States Securities and Exchange Commission in November 2021, federal authorities said. He was set to appear before the commission to address accusations that he ran his investment firms, Hercules Investments LLC, based in downtown Los Angeles, and Index Strategy Advisors Inc., based in Redondo Beach, like a Ponzi scheme, authorities said.
Instead, he fled and cut off his phone and email accounts, telling his lover and business partner he planned to “vanish,” court documents said. While on the run, a federal grand jury indicted McDonald on one count of securities fraud, one count of wire fraud, three counts of investment adviser fraud, and two counts of engaging in monetary transactions in property derived from unlawful activity.
McDonald allegedly convinced investors to adopt his “risky short position that effectively bet against the health of the United States economy in the aftermath of the U.S. presidential election,” authorities said. When that prognostication proved to be false, McDonald’s investors lost between $30 million and $40 million, according to prosecutors.
He allegedly continued to raise capital, but instead of investing it, he allegedly used the funds to pay for his lifestyle. He bought a $174,000 Porsche, paid over $100,000 in rent and spent $6,800 in menswear, court documents said. McDonald reportedly did not disclose to investors the massive losses he incurred following the election position.
Court documents say he never repaid his investors. When one person who invested over $350,000 said he needed some money for a down payment on a home, McDonald allegedly told him that much of the money had been lost.
CNBC paid McDonald as contributor and he appeared on programs several times in late 2020 and early 2021. He reportedly gave stock recommendations on business he thought would excel during the COVID-19 pandemic. He also spoke to the “disconnect between Main Street and Wall Street” when it came to the success of the stock market versus the struggles that the pandemic presented, feds noted.
If convicted, McDonald faces up to 20 years in prison.
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