INVESTORS: James Arthur McDonald, Jr. and his SEC-registered investment adviser firm, Hercules Investments, LLC, were charged by the SEC in connection with two fraudulent securities offerings.
On September 21, 2022, the SEC announced charges against James Arthur McDonald, Jr. and his SEC-registered investment adviser firm, Hercules Investments, LLC in connection with two fraudulent securities offerings.
The SEC’s complaint alleges that McDonald raised over $3.6 million from investors between May 2019 and October 2021, which he told investors would be used to trade securities through an investment vehicle called the Index Strategy Advisors Fund. In reality, McDonald used less than half of those funds for trading and did not engage in any trading with the funds for long stretches of time. Instead, McDonald allegedly misappropriated more than $1 million of the funds for personal expenses, including luxury vehicles and paying rent on his home, and misappropriated more than $2 million of the funds for Ponzi-like payments, payments to his Hercules’ investment adviser clients and expenses associated with operating Hercules.
The SEC further alleges that, from February 2021 to October 2021, McDonald raised $1.5 million through the sale of equity investments in Hercules’s business. McDonald falsely represented that investor funds would be used to expand Hercules’s business, lied about the firm’s financial condition, and failed to disclose that he had promised Hercules clients that the firm would repay earlier losses. The complaint also alleges that McDonald commingled the investor funds with Hercules’s assets and his personal assets, and used $440,000 of those funds for personal expenses, including to pay his personal credit card bills.
In a parallel action, the United States Attorney’s Office for the Central District of California announced criminal charges against McDonald.
The SEC’s complaint charges McDonald with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The complaint also charges McDonald with violating Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder, which prohibit certain transactions by investment advisers.
The Sonn Law Group is currently investigating allegations surrounding James Arthur McDonald, Jr. or Hercules Investments, LLC. We represent investors in claims against negligent brokers and brokerage firms. If you or your loved one experienced investment losses, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.