Skip to main content

Hercules Investments chief investment officer James McDonald used to be a familiar face on CNBC, pontificating about market matters as an expert thereon. Of course, like most of the people brought on by CNBC to explain how the market will react to certain things (like talking heads on any subject on any 24-hour news channel), being generally right about those things was not a booking requirement. Which was great for McDonald, because he apparently really muffed the market response to a Joe Biden victory over Donald Trump two years ago: He assumed that the ousting of an incompetent demagogue would tank things.

Actually, he didn’t just assume it: He bet his clients’ money rather heavily on it, and lost them upwards of $40 million doing so. This seriously cut in to his fee income, and CNBC appearance fees—oh, yes, he was still bloviating on television about on how people should invest for more than a year-and-a-half after the most spectacular wrong call of his career—apparently don’t cover the Porsches or the rent, so he decided to raise some more. Unfortunately, according to the Justice Department and SEC, he didn’t tell those new investors about all the money he lost on the election, nor precisely what he was going to do with it, as dropping $174K at a Porsche dealership and paying $110K to his landlord are not the same thing as launching a mutual fund. When facing allegations such as these, it’s best not to be seen on TV. Or before an SEC investigator. Or, you know, anywhere, really.

A CNBC spokesperson told USA TODAY the network no longer allowed McDonald on the air as soon it found out he was under investigation. He last appeared on the network in July 2021.

The United States Securities and Exchange Commission subpoenaed McDonald to testify before it in November 2021, but – without advance notice – he failed to appear as required. According to the complaint, McDonald also appears to have terminated his previous phone and email accounts and told one person that he planned to “vanish.”

McDonald, who faces up to 20 years imprisonment if convicted, “is believed to be in hiding,” the U.S. Attorney’s office said in a news release.

Arcadia Man Charged with Securities Fraud for Stealing Client Funds and Concealing His Investment Firm’s Massive Financial Losses [press release]
He appeared as a financial expert on TV. Now he's wanted on fraud charges. [USA Today]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Related

jail

If You’re Gonna Inflate Valuations, Best To Avoid The ‘Impossible’

Unless you are aiming for simultaneous knocks on the door from the FBI, SEC and CFTC. Then it’s fine.

car dealer

Maybe It Wasn’t Such A Great Idea To Fire A Guy Who Knew About The Ponzi Payments You Were (Allegedly) Making

Because in addition to “unemployed,” he can also now call himself “whistleblower.”

By Mike Cauldwell (https://www.casascius.com/photos.aspx) [Public domain], via Wikimedia Commons

Former Alleged Father-Son Fraudster Allegedly Became A Mama’s Boy

No, Brent Kovar’s mother didn’t have an “artificial intelligence supercomputer” in her basement, the SEC says.

gavel-money-bills-law-legal-litigation-finance-300x221

Texas Real Estate Executives Guilty Of Proving Kyle Bass Right

And, also, relatedly and with the prospect of decades in prison attach, conspiracy and fraud.

By Chris Potter (Flickr: 3D Judges Gavel) [CC BY 2.0], via Wikimedia Commons

Second Trial Avoided Rather Less Auspicious For Private Equity Firm Than The First

It doesn’t sound like Merrick Garland is looking as kindly on the GPB boys as Bill Barr.

gavel-money-bills-law-legal-litigation-finance-300x221

Turns Out Forging An Investor’s Signature Is More Than Just ‘Bad Judgment’

According to the SEC and Justice Department, it, along with other things, is fraud.