Former Arcadia man accused of mendacity, shedding tens of millions of {dollars}

Former Arcadia man accused of mendacity, shedding tens of millions of {dollars}

A former Arcadia man who ran Los Angeles County-based funding firms was charged Wednesday, Sept. 21, by federal prosecutors who declare that he lied to buyers.

James Arthur McDonald Jr., former CEO and chief funding officer of Hercules Investments LLC and Index Technique Advisors Inc. was charged with one depend of securities fraud, in line with the U.S. Lawyer’s Workplace.

Prosecutors declare McDonald, 50, misplaced shoppers of his of Los Angeles-based agency Hercules tens of millions of {dollars} in late 2020 after adopting a brief place that wager towards the well being of the USA economic system within the aftermath of the COVID-19 pandemic and the election, projecting that they might end in main selloffs that will trigger the inventory market to drop.

In actuality, he ended up shedding shoppers between $30 million and $40 million when then market didn’t decline, prosecutors mentioned.

In December 2020, Hercules shoppers started complaining to firm workers in regards to the losses of their accounts.

His compensation for his funding advisory providers was based on a proportion of belongings underneath his administration – about 2% of a shopper’s whole belongings held by Hercules. Due to this, the losses to Hercules shoppers considerably decreased the charges McDonald was entitled to gather.

In early 2021, tens of millions of {dollars}’ price of funds have been solicited from buyers within the type of a capital increase for Hercules, however McDonald is alleged of misrepresenting how the funds can be used. He additionally didn’t disclose the large losses Hercules beforehand sustained to buyers, in line with prosecutors.

As a part of the capital increase, he obtained $675,000 in funding funds from one sufferer group on March 9, 2021, in line with the usAttorney’s Workplace. Roughly $174,610 of these funds have been used at a Porsche dealership.

Roughly $109,512 was transferred to the owner of a house McDonald was renting in Arcadia; and about $6,800 was spent on a web site that sells designer menswear.

McDonald allegedly additionally falsely represented to shoppers that his second agency, Index Technique Advisors, primarily based in Redondo Seashore, was a registered funding adviser, despite the fact that he had withdrawn the corporate as a state-registered funding adviser agency in Could 2019.

He was subpoenaed to testify by the USA Securities and Change Fee in November 2021 however failed to seem. Prosecutors mentioned they imagine he’s in hiding.

If discovered responsible, McDonald faces as much as 20 years in federal jail.

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