LOS ANGELES — A man who ran two California-based investment firms and frequently appeared as a financial news analyst on television was charged Wednesday with securities fraud for allegedly defrauding clients of millions of dollars, federal prosecutors said.
James Arthur McDonald Jr., 50, has been charged with a single count of fraud and could face up to 20 years in prison if convicted, the U.S. Attorney’s Office said in a statement.
McDonald, who lived in the Los Angeles suburb of Arcadia, was in hiding, the statement said. It was not immediately clear if he had an attorney who could speak on his behalf.
Prosecutors allege McDonald hid massive financial losses from some customers and used some of the investment money for personal expenses, spending some of it at a Porsche dealership and on a website that sells designer clothes for men.
McDonald was CEO of Hercules Investments LLC of Los Angeles and Index Strategy Advisors Inc. of Redondo Beach, and often appeared as an analyst on the CNBC financial news network, authorities said.
At the end of 2020, McDonald’s lost between $30 million and $40 million of Hercules customers’ money after taking “a risky short position” based on its poor prediction that the stock market would plummet due to the coronavirus pandemic. COVID-19 and US presidential election results. , the U.S. Attorney’s Office said.
In early 2021, McDonald’s “solicited millions of dollars in funds from investors in the form of a purported capital raise for Hercules, but misrepresented how the funds would be used and did not disclose losses. massive that Hercules had suffered before,” the statement said.
Also on Wednesday, the U.S. Securities and Exchange Commission filed a civil lawsuit accusing McDonald’s and Hercules of violations of federal securities law.