A former San Gabriel Valley resident who was a frequent guest on financial television news programs then became a fugitive from justice after being accused of defrauding investors pleaded guilty on Monday, April 7, to conning victims out of at least $2.7 million.
James Arthur McDonald Jr., 53, formerly of Arcadia, entered his plea in downtown Los Angeles 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.
U.S. District Judge Dale S. Fischer set sentencing for Aug. 4.
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 face allegations that he had defrauded investors.
According to his plea agreement filed in Los Angeles federal court, law enforcement found at McDonald’s Washington state hideout, among other things, a fake Washington, D.C., driver’s license bearing McDonald’s photograph and the name “Brian Thomas.”
McDonald was the chief executive and chief investment officer of two companies: Hercules Investments, based in downtown Los Angeles, and Redondo Beach-based Index Strategy Advisors. 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 United States economy in the aftermath of the U.S. 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 also falsely represented to clients that ISA, his other firm, was a registered investment adviser, even though he had withdrawn ISA as a state-registered investment adviser firm in May 2019.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 sent ISA clients false account statements, including for one client who invested about $351,000 and later needed the money to make a down payment on a home. The client was informed by McDonald that much of the money had been lost, and the investor never got his full investment back, according to the U.S. Attorney’s Office.