A fugitive has been charged with a $35 million fraud — during which he allegedly informed traders he was a hedge fund billionaire, a Harvard MBA and a Particular Forces veteran who was wounded twice in Iraq — in California. He was arrested days later by the FBI SWAT staff. On the meme, officers mentioned on Wednesday.
Justin Costello, 42, a Las Vegas resident has been accused by federal prosecutors and the Securities and Change Fee of defrauding hundreds of traders and others as a part of a fancy rip-off that, amongst different issues, has fueled his alleged efforts to type a hashish conglomerate. To avert.
One among his firms, Pacific Banking Corp. supplied banking companies to a few marijuana firms. Officers mentioned he additionally used it to defraud himself and different companies owned by him of not less than $3.6 million.
Additionally they say that he was concerned in a scheme that value greater than 7,500 traders about $25 million to make false claims a couple of plan by one among his personal firms to purchase out 10 different companies.
Prosecutors mentioned one other 29 traders misplaced $6 million after investing immediately with Costello primarily based on his false representations.
Prosecutors mentioned Costello, who additionally had a residence in La Jolla, California, used about $42,000 from traders for prices associated to his marriage to Katarina Rosseni.
A video from that marriage ceremony, reviewed by CNBC, confirmed each a cake and an ice sculpture bearing the James Bond movie emblem “007” on the semi-automatic pistol and a belly-dancing efficiency by Rossini, which in instances shouldn’t be charged. in opposition to her husband.
“Mr. Costello reportedly informed plenty of tall tales to steer victims to take a position thousands and thousands of {dollars} – the cash he used to his benefit,” US Legal professional Nick Brown for the Western District of Washington mentioned in a press release.
“In a fancy scheme involving shell firms, penny shares and monetary companies for marijuana companies, Mr. Costello used Twitter, press releases, securities filings and claims of nice wealth to color an image of spectacular monetary success,” Brown mentioned. used.”
“Truly that image was a mirage,” he mentioned.
A lawyer for Costello didn’t reply to a request for remark.
Costello, who beforehand lived in Bellevue, Washington, agreed by way of his lawyer to give up on the FBI workplace in San Diego final Thursday, after being knowledgeable that he had been arrested a day earlier in Washington state by federal authorities officers. He was indicted in courtroom on felony costs by a grand jury, regulation enforcement officers informed CNBC. Within the grievance, he’s charged with 22 counts of wire fraud and three counts of securities fraud.
However Costello by no means confirmed as much as the FBI workplace that day as promised, officers mentioned.
The identical day, the SEC charged Costello and an alleged co-conspirator, David Ferraro, in a civil lawsuit, of defrauding traders and utilizing Twitter to reveal their sale of shares with out disclosing their sale as costs rose. .
As a federal indictment, the SEC charged Costello with fraudulent conduct in relation to 2 publicly traded firms he beforehand managed, Hempstreck and GRN Holding Corp.
The SEC mentioned in a single occasion, Costello bought $1.8 million in inventory to a married couple at a markup of greater than 9,000%.
Ferraro, a 44-year-old Radford, Virginia, resident who was not charged with felony indictment with Costello, didn’t instantly reply to a request for remark from CNBC.
Ferraro is accused of utilizing a Twitter account with the deal with @computerbux, which deliberate to have round 10,000 followers on the finish of 2019.
Quickly after Costello didn’t give up Thursday, the FBI launched a “wished” poster that includes Costello, saying he was a fugitive.
“He can be touring along with his spouse, Caterina Rossani, who shouldn’t be a fugitive,” mentioned the poster, which incorporates a number of images of Costello, a few of which embody Rossini.
The poster states that the couple can be touring with their little canine Harry.
On Tuesday night time, Costello was arrested by an FBI SWAT staff in El Cajon, California, in San Diego County, in keeping with Emily Langley, a spokeswoman for the U.S. Legal professional’s Workplace for the Western District of Washington.
Langley mentioned Costello was taken to hospital on Wednesday morning after a well being grievance.
It’s not but recognized when he’ll make his first look in federal courtroom in California.
Costello fears Steven Selna, an Oakland, California, lawyer whose shopper, CCSAC Inc.
CCSAC has a pending lawsuit in opposition to Costello and his firms within the U.S. District Court docket for the Northern District of California, regardless of CCSAC failing to pay $2.2 million in taxes to the State of California on behalf of CCSAC from its account in Pacific Banking. . Company
Selna informed CNBC that Costello has not less than $2.9 million belonging to CCSAC, which he mentioned has a serious presence in California by way of retail and distribution operations. The agency, which plans to develop to the East Coast in 2023, believes its financial losses from Costello could possibly be as excessive as $5 million.
The felony indictment in opposition to Costello accuses him of fraudulently diverting $300,000 of CCSAC cash deposited with Pacific Banking to buy shares in a publicly traded shell firm in 2019, finally costing Costello’s then-private partnership. For the aim of finishing a reverse merger with the at the moment held firm, GRN Holding Corp.
On account of that merger GRN’s shares turned publicly traded.
GRN Holding’s most up-to-date SEC submitting mentioned Costello resigned as the corporate’s CEO in April, the identical month he bought 144 million shares of GRN Holding to its present CEO for $140,000.
The indictment additionally says that at varied occasions throughout Costello’s alleged plans, he described one other firm he ran, GRN Funds LLC, with greater than $1 billion beneath administration and greater than $600 million beneath deposits.
The grievance states that this declare was not true.
Based on the indictment, in a civil case filed in opposition to Costello by CCSAC final month, a decide ordered him to declare the title of the monetary establishment and different particulars concerning the account the place CCSAC’s funds had been owed.
Costello submitted a sworn declaration stating that not less than $2.9 million in CCSAC funds was being held at a credit score union in Tacoma, Washington within the title of GRN Funds LLC, the indictment notes.
However opposite to that declare, the GRN Funds checking account on the credit score union “has a steadiness of $15.35 as of September 9, 2022,” the indictment states.
“All we’re inquisitive about is getting our shopper’s a reimbursement,” mentioned Selena, CCSAC’s lawyer. “If it facilitates that that is a superb factor,” he mentioned, referring to Costello’s arrest.
Selna additionally mentioned that Costello, in coping with CCSAC, “positively presents himself as being extremely profitable on this trade, and he’ll shield our shopper’s cash. And that was not true.”
The indictment states that when Costello solicited funds from traders, he made false claims that included saying he graduated from the College of Minnesota and obtained a grasp’s diploma in enterprise administration from Harvard.
The grievance mentioned he additionally claimed to have served two excursions in Iraq as a member of the Particular Forces and was shot twice, leaving shrapnel in his leg.
Costello additionally falsely acknowledged that “he was a billionaire,” “he managed wealth for rich people, together with a Saudi sheikh,” and “he had 14 years of expertise on Wall Road,” the indictment states.
“None of that is true,” mentioned a press launch issued by U.S. Legal professional Brown’s workplace.
The indictment says that in 2019, when a web-based article questioned Costello’s statements about his training, he issued an 8-Ok submitting with the SEC to GRN Holding Corp., stating that Costello “publicly Was a graduate of Winona State College with a level in Administration who attended Harvard College however didn’t graduate.”
“This assertion was additionally deceptive,” the indictment mentioned. It famous that “Costello took just one course in Harvard’s persevering with training program.”
That very same yr, Costello issued a press launch to GRN Holdings stating that it had non-binding letters of intent to accumulate not less than 10 firms, and that within the following months it carried out due diligence for every firm. issued 10 press releases asserting the completion, the indictment mentioned. ,
Filings by GRN Holding with the SEC additionally mirror these claims.
However “GRN Holding Company by no means accomplished the acquisition of the businesses, though Justin Costello was an affiliate, shareholder, proprietor or supervisor of every firm,” the indictment mentioned.
“Most firms had been as a substitute acquired by Renewable Fuels Inc., one other [over-the-counter market-]Buying and selling firm managed by Justin Costello.”
And opposite to Costello’s claims of traders in GRN Holdings, “the businesses had little or no income or property,” the indictment mentioned.
The indictment states that between July 2019 and Might 2021 “greater than 7,500 traders purchased and bought GRN Holding company inventory through the development of Justin Costello, and continued to misrepresent materials regarding GRN Holding.”
“Collectively these traders misplaced roughly $25 million.”
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