The firm and McDonald sent investors false monthly account statements, the agency said, and the statement showed 100% cash balances at the end of the month, as well as cumulative returns from supposed trading. McDonald wrote the reports, the SEC said. From May 2019 to October 2021, “McDonald transferred approximately $1.6 million of the amount raised from [Index Strategy Advisors] Fund investors, or 45% of total investor funds to a brokerage account held in [the firm’s] name that McDonald controlled,” the SEC’s lawsuit said.
The SEC said he raised $1.5 million in the Hercules capital raise, which included an offer and sale of units in the LLC itself with promises that investors would be investing in the business as he expanded it and that the firm would eventually be worth $1 billion.
The SEC said the total of fraudulently raised money was $5.1 million (between the $1.5 million Hercules capital raise and the $3.6 million Index Strategy Advisors investments) from 23 investors and clients.
McDonald has been charged by the DOJ with one count of securities fraud and faces up to 20 years in federal prison.