Fake Cannabis Tycoon Admits To $35M Fraudulent Scheme

It’s not just Congressional wannabes who invent lies about themselves to impress naïve voters and dupe their own party, it seems such posers have seeped into the cannabis industry as well. And, they're not just enhancing their resumé, they're stealing loads of money.

Justin Costello, who posed as a billionaire, a wounded Special Forces Iraq War veteran and a legal cannabis investor pleaded guilty to securities fraud in a Seattle federal court Wednesday.

The Costello Caper

The guilty plea came several months after an FBI SWAT team arrested Costello in a remote area of southern California where he was carrying a backpack containing gold bars, $70,000 in U.S. and Mexican currency and a fake ID. Costello was apparently heading south of the border after having failed to surrender as agreed to face a 25-count indictment.

At the time, reported MJBiz, U.S. Attorney Nick Brown called the Costello caper “a complex scheme involving shell companies, penny stocks, and financial services for marijuana businesses" in which "Costello used Twitter, press releases, securities filings, and claims of great wealth to paint a picture of fabulous financial success." 

Though Costello's Wednesday guilty plea was to a single count of securities fraud, it covered much of the criminal conduct alleged in the indictment.

Under the agreement, prosecutors will recommend a 10-year prison sentence. Costello agreed to pay the victims of his frauds, reported CNBC, not less than $35 million in restitution.

What Else Did He Do?

In his plea agreement, Costello admitted that he lied to investors and would-be investors by falsely claiming he had graduated from the University of Minnesota and had an MBA from Harvard. He also said he’d managed money for wealthy individuals and had 14 years of experience on Wall Street - both untrue.

The agreement pointed out that while Costello was lying about his qualifications from July 2019 through May 2021, more than 7,500 investors bought and sold stock in his publicly traded company, GRN Holding Corp GRNFD and collectively lost about $25 million

Other scams included some 30 investors who got involved in another Costello company, Hempstract HPST and collectively lost about $6 million after believing his lies about the company’s business operations.

Then there were wild stories that a large grocery business in Chicago had purchased $12 million in Hempstract products and that Hempstract had nearly 7,000 pounds of CBD isolate valued at $10.7 million.

Costello also fraudulently diverted some $3.7 million from three cannabis companies, which held agreements to obtain banking services from one of his companies - Pacific Banking Corp.

Prosecutors also noted that Costello engaged in a fraudulent pump-and-dump scheme in which he manipulated the prices of multiple stocks. Costello bought large blocks of stocks at low prices and then paid another person to use a Twitter account to promote the companies by making false claims about them. Costello made more than $625,000 from that scheme, according to his plea agreement.

One wonders, did Long Island Rep. George Santos take a page from Justin Costello's resume-writing booklet or was it the other way around? 

Photo: FBI Seattle