Former CNBC financial analyst sentenced to 5 years for $3 Million investor fraud in California

CALIFORNIA – A former California resident and frequent financial TV guest, who became a fugitive after scamming investors, was sentenced, August 4, to 60 months in federal prison for defrauding millions, according to the U.S. Department of Justice.

James Arthur McDonald Jr., 53, of San Gabriel Valley, led two Los Angeles-based companies as CEO and chief investment officer: Hercules Investments LLC and Index Strategy Advisors Inc. (ISA).

McDonald frequently appeared as an analyst on the CNBC financial television news network.

Misused $174,610 at a Porsche dealership

In late 2020, McDonald lost tens of millions of Hercules client dollars by taking a risky short position betting against the health of the U.S. economy after the presidential election.

McDonald predicted the pandemic and election would trigger major selloffs and a stock market drop. When the market didn’t drop, Hercules clients lost $30–$40 million. By December 2020, Hercules clients were complaining to staff about account losses.

In early 2021, McDonald raised millions from investors for Hercules, misrepresenting fund use and hiding the company’s prior losses.

As part of the raise, McDonald received $675,000 from one investor group on March 9, 2021. He misused the funds, including $174,610 at a Porsche dealership and $109,512 to his Arcadia landlord.

McDonald caused over $3 million in losses

McDonald also defrauded ISA clients, using less than half of the $3.6 million raised for trading.

Instead, McDonald commingled ISA client funds with personal accounts, spending on luxury cars, rent, credit cards, Hercules expenses, and making Ponzi-like payments to clients.

Prosecutors say McDonald caused over $3 million in losses.

McDonald was a fugitive until June 2024

McDonald skipped an SEC testimony in November 2021 over fraud allegations and remained a fugitive until his June 2024 arrest in Port Orchard, Washington.

McDonald has been in custody since then.

At his Washington hideout, law enforcement found a fake D.C. license with McDonald’s photo and the name “Brian Thomas,” according to court documents.

In September 2022, the SEC charged McDonald and Hercules with securities violations. In April 2024, Judge Percy Anderson held them liable and ordered millions in penalties and disgorgement.

McDonald pleaded guilty on April 7 to one count of securities fraud.

He was sentenced by U.S. District Judge Dale S. Fischer, who will set a restitution hearing at a later date.