How This Fake Cannabis Mogul Defrauded Investors Of Millions Of Dollars

A former resident of Washington, posing as a cannabis mogul, was charged with a $35 million fraud earlier this year. Justin Costello, 42, allegedly fooled investors into believing that he was a hedge fund billionaire, a Harvard MBA, and a special forces veteran who had been twice wounded in Iraq. He swindled thousands of investors who put money in his complex scam which promised to build a cannabis conglomerate.

What did Justin Costello do?

As per the indictment, Costello of Bellevue, Washington, owned and operated a company called Pacific Banking Corp in 2017. The company provided banking services to three marijuana businesses across five states. Between 2019 and 2021, Costello allegedly diverted about $3.7 million from the business to fuel his illegal operation.

Costello also used the fraud proceeds to fund an expensive lifestyle, including his lavish wedding. He also bought two companies trading for pennies and renamed them GRN Holding Corp., which became a fake hedge fund, and Hempstract Inc. which became a fake cannabis company. 

He then went on to create a fake persona of himself, claiming to be an MBA from Harvard University and a special forces veteran who had been wounded twice in Iraq. Further, Costello claimed that he was a billionaire and a hedge fund manager.

He convinced investors that GRN was a private equity and hedge fund he owned with over $1 billion in assets under management. By making false claims and presenting false statements, he defrauded thousands of investors of millions of dollars. Costello used the money to fund his private expenses. He also used about $42,000 to fund his James Bond-themed wedding to Katrina Rosseini, prosecutors said.

Costello also ran a Twitter “pump and dump” stock scheme in which he would acquire the penny stock of a company and then ask people to tweet falsehoods about the company to drive up the stock price. Costello illegally earned about $576,466 from the scheme, as per the official statement.

“Mr. Costello allegedly told many tall tales to convince victims to invest millions of dollars — money he then used for his benefit,” said US Attorney Nick Brown of the Western District of Washington, in a statement.

How much did investors lose?

As per the official statement, between July 1, 2019, and May 18, 2021, over 7,500 investors purchased and sold securities of Costello’s company GRN Holding Corp. Collectively, these investors lost approximately $25 million and with the other company Hempstract Inc. Costello defrauded another nine  investors who invested about $6 million between November 2018 and June 2021, per the official release. 

How was Costello arrested?

After a complaint, the federal court in Washington indicted Costello with three counts of securities fraud and 22 counts of wire fraud. Initially, he agreed to surrender but failed to show up. Later the FBI’s SWAT team obtained an arrest warrant and he was apprehended in a remote area of southern California, carrying a backpack containing gold bars, $70,000 in U.S. and Mexican currency, and a fake ID.

Costello’s conviction and punishment

Costello initially pled not guilty to the charges but later appealed to change the plea. He then pleaded guilty and under a plea agreement, prosecutors recommended a sentence of 10 years in prison. However, Costello was sentenced to 12 years in prison. Costello also agreed to pay victims of his frauds about $35 million in restitution. He forfeited the assets seized at the time of his arrest, including two designer watches, and gem-encrusted jewelry, the office said.