Advisor, CNBC Analyst Pleads Guilty to Conning ClientsAdvisor, CNBC Analyst Pleads Guilty to Conning Clients

A California-based advisor (and frequent CNBC guest) who was on the run from law enforcement for more than two years pleaded guilty this week to stealing millions from investors, according to the Department of Justice.

James Arthur McDonald pleaded guilty to one count of securities fraud, with a maximum potential sentence of 20 years in prison. The department accused McDonald of defrauding his clients out of at least $2.7 million.

McDonald was the CEO and chief investment officer for Los Angeles-based Hercules Investments and frequently appeared as a market analyst on CNBC’s “Fast Money” and “The Exchange.”

However, in late 2020, McDonald lost clients between $30 million and $40 million when he shorted the market, expecting it to dip and have significant selloffs after the COVID-19 crisis and the 2020 presidential election. 

This didn’t happen, and by December, his clients called Hercules about the losses in their accounts. (The losses also affected McDonald’s bottom lines because he tied his fees to the amount of clients’ managed assets.)

The following year, McDonald approached Hercules investors to raise capital for the firm via a mutual fund, but he instead used the funds he raised to pay down the losses the firm’s clients sustained. 

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According to the DOJ, he also used funds for his expenses, spending $174,610 at a Porsche dealership, $109,512 on a home he rented, and nearly $7,000 on designer menswear. 

Simultaneously, he defrauded clients of his other firm, the Redondo Beach, Calif.-based Index Strategy Advisors, using less than half of the $3.6 million raised for trading. Instead, he commingled the funds with his personal account, using the money to purchase luxury cars, pay off credit card charges, pay rent, and make “Ponzi-like” payments to existing ISA clients.

As a part of its investigation into his actions, the SEC contacted McDonald to schedule an interview in Oct. 2021 (eventually subpoenaing him). But McDonald allegedly told his former romantic partner that he planned to “vanish.” In 2023, a Los Angeles grand jury indicted him on wire and investment adviser fraud.

McDonald was arrested outside of Seattle, Wash., in June 2024, where law enforcement found, among other things, a fraudulent ID with McDonald’s photograph and the name “Brian Thomas.”