Man claimed to be billionaire, Harvard MBA, Iraq vet in financial fraud

A fugitive accused of a daring $35 million fraud — in which he allegedly told investors he was a hedge fund billionaire, a Harvard MBA and a Special Forces veteran who had been wounded twice in Iraq — was arrested after several days by an FBI SWAT team in California on the lam, authorities said Wednesday.

Las Vegas resident Justin Costello, 42, is accused by federal prosecutors and the Securities and Exchange Commission of defrauding thousands of investors and others as part of a complex scam that touted, among other things, his alleged efforts to build a cannabis conglomerate.

One of his companies, Pacific Banking Corp., provided banking services to three marijuana companies. Authorities said he also used it to divert at least $3.6 million to himself and other companies he owned.

They also say he participated in a scheme that cost more than 7,500 investors about $25 million by making false claims about plans by one of his own companies to buy 10 other firms.

Another 29 investors lost $6 million after investing directly with Costello based on his false claims, prosecutors said.

Costello, who also had a residence in La Jolla, Calif., used about $42,000 of the investors’ money for expenses related to his wedding to Katrina Rosseini, prosecutors said.

A video of the wedding reported by CNBC shows both a cake and an ice sculpture featuring the James Bond movie logo with the numbers “007” above a semi-automatic pistol and a belly dance performance by Rosseini, who is not charged in the cases against her husband.

“Mr. Costello allegedly told numerous stories to convince victims to invest millions of dollars — money that he then used for his own benefit,” U.S. Attorney Nick Brown of the Western District of Washington said in a statement.

“In a complex scheme involving shell companies, penny stocks and financial services for marijuana companies, Mr. Costello used Twitter, press releases, securities and claims of great wealth to paint a picture of fabulous financial success,” Brown said .

“In truth, the image was a mirage,” he said.

An attorney for Costello, who previously lived in Bellevue, Wash., did not return a request for comment.

Costello had agreed through his attorney to turn himself in last Thursday to the FBI office in San Diego after being informed that he had been indicted on criminal charges by a grand jury in federal court in Washington state a day earlier. law enforcement officials told CNBC. The complaint accuses him of 22 counts of wire fraud and three counts of securities fraud in the case.

But Costello never showed up as promised at that FBI office that day, officials said.

That same day, the SEC hit Costello and an alleged co-conspirator, David Ferraro, with a civil suit accusing them of defrauding investors and using Twitter to promote penny stocks without disclosing their own sales of the shares as prices rose.

As in the federal indictment, the SEC accuses Costello of fraudulent conduct in connection with two publicly traded companies he previously controlled, Hempstract and GRN Holding Corp.

The SEC said in one case Costello sold a married couple $1.8 million in stock at a more than 9,000% profit on its price.

Ferraro, a 44-year-old Radford, Va., resident who was not a defendant in the criminal indictment with Costello, did not immediately return a request for comment from CNBC.

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Ferraro is accused of using the Twitter account with the handle @computerbux, which had nearly 10,000 followers at the end of 2019, in the scheme.

After Costello failed to surrender Thursday, the FBI soon after issued a “Wanted” poster with Costello noting that he was on the run.

“He may be traveling with his wife, Katrina Rosseini, who is not a refugee,” said the poster, which featured several photos of Costello, some of which included Rosseini.

The poster noted that the couple may be traveling with their little dog, who is named Harry.

On Tuesday evening, Costello was arrested by an FBI SWAT team in El Cajon, California, in San Diego County, according to Emily Langlie, a spokeswoman for the US Attorney’s Office for the Western District of Washington.

On Wednesday morning, Costello was taken to a hospital after complaining of health problems, Langlie said.

It is not yet known when he will make his first appearance in federal court in California.

Costello’s apprehension was welcome news to Steven Selna, an Oakland, Calif., attorney whose client, CCSAC Inc., was one of three cannabis companies allegedly defrauded by Costello.

CCSAC has a lawsuit pending against Costello and his companies in the US District Court for the Northern District of California for failing to pay $2.2 million in taxes to the state of California on CCSAC’s behalf from his account in Pacific, despite claims to the contrary Banking Corp.

Selna told CNBC that Costello had at least $2.9 million belonging to CCSAC, which he said has a large presence in California through retail and distribution operations. The firm, which plans to expand to the East Coast in 2023, believes its financial loss from Costello could be as high as $5 million.

The criminal indictment against Costello accuses him of fraudulently diverting $300,000 of CCSAC’s money deposited with Pacific Banking to purchase stock in a publicly traded shell company in 2019 with the intent of ultimately completing a reverse merger with Costello’s then-privately held company , GRN Holding Corp.

GRN’s shares were publicly traded as a result of this merger.

GRN Holding’s latest SEC filing says Costello stepped down as CEO of the company in April, the same month he sold 144 million shares of GRN Holding to its current CEO for $140,000.

The indictment also says that at various times during Costello’s alleged schemes, he described another company he ran, GRN Funds LLC, as having more than $1 billion under management and $600 million in deposits.

That claim was not true, the complaint states.

According to the indictment, a judge in the civil case filed against Costello by CCASC last month ordered him to declare, under penalty of perjury, the name of the financial institution and other details about the account where the balance of CCSAC’s funds were held.

Costello provided a sworn statement saying at least $2.9 million in CCSAC’s funds were held at a credit union in Tacoma, Wash., in the name of GRN Funds LLC, the indictment states.

But contrary to that claim, GRN Fund’s checking account at the credit union “has a balance of $15.35 as of September 9, 2022,” the indictment said.

“All we’re interested in is getting our client’s money back, and if that facilitates that, that’s a good thing,” Selna said.

The attorney also said that Costello, in connection with CCSAC, “definitely presented himself as being very successful in this industry and that he wanted to protect our client’s money. And that was not true.”

The indictment says that when Costello solicited funds from investors, he made false claims that included saying he graduated from the University of Minnesota and had a master’s degree in business administration from Harvard.

He also claimed to have served two tours in Iraq as a member of the Special Forces and been shot twice, leaving shrapnel in his leg, the complaint states.

Costello also falsely said “he was a billionaire”; “he managed money for wealthy individuals, including a Saudi sheikh”; and “he had 14 years of experience on Wall Street,” the indictment said.

“None of that is true,” said a press release from US Attorney Brown’s office.

The indictment says that in 2019, when an online article questioned Costello’s statements about his education, he had GRN Holding Corp. to issue an 8-K filing with the SEC, which stated that Costello “was a graduate of Winona State University with a degree in Public Administration who attended Harvard University but did not graduate.”

“This statement was also misleading,” the indictment states. It noted that “Costello took only one course in Harvard’s graduate program.”

That same year, Costello had GRN Holdings issue a press release stating that it had non-binding letters of intent to acquire at least 10 companies, and in the following months, Costello issued 10 press releases announcing the completion of due diligence for each company, the indictment said .

Filings by GRN Holding with the SEC also reflected these claims.

But “GRN Holding Corporation never completed the acquisitions of the companies, even though Justin Costello was a subsidiary, shareholder, owner or director of each company,” the indictment states.

“Most of the companies were instead acquired by Renewal Fuels Inc., another [over-the-counter market-]traded company controlled by Justice Costello.”

And contrary to Costello’s claims to investors in GRN Holdings, “the companies had little or no revenue or assets,” the indictment said.

Between July 2019 and May 2021, over 7,500 investors bought and sold GRN Holding Corporate stock while Justin Costello made, and continues to make, the material misrepresentations regarding GRN Holding, the indictment states.

“Together, these investors lost approximately $25 million.”

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