Justin Costello, who posed as a billionaire and twice-wounded Special Forces Iraq veteran to dupe investors while portraying himself as a legal cannabis mogul, pleaded guilty Wednesday to securities fraud.
Under a plea agreement with Costello, prosecutors will recommend a sentence of 10 years in prison, with Costello echoing that decision and being barred from asking for less time than that.
Costello also agreed to pay victims of his frauds — which related to cannabis firms, a would-be bank, and stock pump-and-dumps — not lower than $35 million in restitution.
Costello’s guilty plea in federal court in Seattle got here three months after an FBI SWAT team apprehended the 42-year-old in a distant area of southern California, carrying a backpack containing gold bars, $70,000 in U.S. and Mexican currency, and a fake ID.
Days earlier, he had did not give up as agreed to face a 25-count indictment within the case.
That indictment charged Costello with three counts of securities fraud and 22 counts of wire fraud.
His guilty plea Wednesday was to a single count of securities fraud, nevertheless it covered much of the criminal conduct alleged within the indictment.
Prosecutors agreed as a part of the plea deal to not file criminal charges against Costello’s wife “for any offenses known” to the U.S. Attorney’s Office for the Western District of Washington in reference to the investigation.
Costello had used about $42,000 of investors’ money to pay for his wedding, prosecutors have said. That wedding featured a cake and an ice sculpture featuring the “007” James Bond movie logo.
Sentencing for Costello, who has been held in jail without bail since his arrest, was scheduled for April 21.
Costello admitted in his plea agreement to lying to investors and would-be investors by falsely claiming he had graduated from the University of Minnesota and had a master’s degree in business administration from Harvard. Costello also lied by saying he had managed money for wealthy individuals and had 14 years of experience on Wall Street.
The agreement says that while Costello was lying about his qualifications from July 2019 through May 2021, greater than 7,500 investors bought and sold stock in his publicly traded company, GRN Holding Corp. Those investors collectively lost about $25 million, the plea agreement says.
Nearly 30 investors in one other Costello company, Hempstract, collectively lost about $6 million after counting on his false statements concerning the firm’s business operations, the agreement notes. Those lies included claims that a big grocery business in Chicago had made a $12 million purchase order for Hempstract products, and that Hempstract had greater than 3,100 kilograms of CBD isolate valued at $10.7 million.
In one other scam, Costello fraudulently diverted a complete of nearly $3.7 million from three marijuana businesses that had agreements to acquire banking services from one other one among his firms, Pacific Banking Corp., the plea deal said.
Finally, prosecutors wrote, Costello between October 2019 and January 2021 engaged in a fraudulent pump-and-dump stock scheme wherein he manipulated the costs of multiple stocks.
In that scheme, Costello bought large blocks of stocks of the businesses at low prices, after which paid one other man to make use of a Twitter account to fraudulently promote the businesses by making false claims about them. Costello made greater than $625,000 from that scheme, in response to his plea agreement.
The opposite man involved in that scheme was not identified by name by prosecutors, who used his initials, D.F., to explain him.
But in late October, a Radford, Virginia, man named David Ferraro, 44, agreed to settle a civil lawsuit filed by the Securities and Exchange Commission accusing him and Costello of engaging in pump-and-dumps of penny stocks. Ferraro was not criminally charged with Costello.
The SEC’s suit against Costello stays pending.
