James Arthur McDonald Jr., 52, was arrested Saturday at a residence in Port Orchard, Washington, and will eventually be extradited to Los Angeles in the coming weeks to face federal charges in that district, the Department of Justice said.
A former CNBC financial pundit and finance CEO was arrested over the weekend after three years on the run and is accused of defrauding millions from his investors following a failed “bet against” the U.S. economy in 2020, the Department of Justice announced.
James Arthur McDonald Jr., 52, was arrested Saturday at a residence in Port Orchard, Washington, and will eventually be extradited to Los Angeles, California, in the coming weeks to face federal charges in that district, the Department of Justice said.
The Department of Justice (DOJ) said in a press release that McDonald Jr.’s “troubles began in early 2020 when the former financial adviser reportedly 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 US presidential election.”
“McDonald projected that the COVID-19 pandemic and the election would result in major selloffs that would cause the stock market to drop,” the DOJ added. When the market downturn never happened, McDonald Jr.’s company, Hercules Investments LLC, lost between “$30 million and $40 million” of clients’ funds, the DOJ said.
In January 2021, he allegedly solicited millions of dollars worth of funds from investors to raise capital for Hercules and allegedly “misrepresented how the funds would be used” and never disclosed to investors “the massive losses Hercules previously sustained,” the Department of Justice said.
McDonald Jr. had been a fugitive since November 2021 after he failed to appear before the United States Securities and Exchange Commission to testify regarding accusations of defrauding investors, the DOJ said.
A public information officer of the Department of Justice tells Inside Edition Digital via email that McDonald does not have an attorney listed in his file but “made his initial appearance (which is a bond hearing) yesterday in U.S. District Court in Tacoma, Washington. A federal magistrate judge ordered him jailed without bond. He is expected to be arraigned in U.S. District Court in Los Angeles in the coming weeks, at which time he will enter a plea.”
If convicted of all charges, McDonald would face a statutory maximum sentence of 20 years in federal prison for each securities fraud and wire fraud count, up to 10 years in federal prison on the monetary transactions derived from unlawful activity count, and up to five years in federal prison on the investment adviser fraud count.
