2 years ago
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A fugitive charged with an audacious $35 cardinal fraud — successful which helium allegedly told investors helium was a hedge money billionaire, a Harvard MBA and a peculiar forces seasoned who had been doubly wounded successful Iraq — was arrested by an FBI SWAT squad successful California aft days connected the lam, authorities said Wednesday.
Las Vegas nonmigratory Justin Costello, 42, is accused by national prosecutors and the Securities and Exchange Commission of swindling thousands of investors and others arsenic portion of a analyzable scam that touted his purported efforts to physique a cannabis conglomerate, among different things.
One of his companies, Pacific Banking Corp., provided banking services to 3 marijuana companies. Authorities said helium besides utilized it to divert astatine slightest $3.6 cardinal to himself and different firms helium owned.
They besides accidental that helium engaged successful a strategy that outgo much than 7,500 investors astir $25 cardinal by making mendacious claims astir plans by 1 of his ain companies to acquisition 10 different firms.
Another 29 investors mislaid $6 cardinal aft investing straight with Costello based connected his mendacious representations, prosecutors said.
Costello, who besides had a residence successful La Jolla, Calif., utilized astir $42,000 of investors' wealth for costs associated with his wedding to Katrina Rosseini, prosecutors said.
A video of that wedding reviewed by CNBC shows some a barroom and an crystal sculpture boasting the James Bond movie logo of the numbers "007" implicit a semi-automatic pistol and a belly-dancing show by Rosseini, who is not charged successful the cases facing her husband.
"Mr. Costello allegedly told galore gangly tales to person victims to put millions of dollars — wealth helium past utilized for his ain benefit," said U.S. Attorney Nick Brown of the Western District of Washington, successful a statement.
"In a analyzable strategy involving ammunition companies, penny stocks, and fiscal services for marijuana businesses, Mr. Costello utilized Twitter, property releases, securities filings, and claims of large wealthiness to overgarment a representation of fabulous fiscal success," Brown said.
"In information that representation was a mirage," helium said.
An lawyer for Costello, who antecedently lived successful Bellevue, Washington, did not instrumentality a petition for comment.
Costello had agreed done his lawyer to surrender past Thursday to the FBI bureau successful San Diego aft being informed helium had been indicted connected transgression charges by a expansive assemblage successful national tribunal successful Washington authorities a time earlier, instrumentality enforcement officials told CNBC. The ailment accuses him of 22 counts of ligament fraud and 3 counts of securities fraud successful the case.
But Costello ne'er showed up arsenic promised astatine that FBI bureau that day, officials said.
On the aforesaid day, the SEC slapped Costello and an alleged co-conspirator David Ferraro, with a civilian suit accusing them of defrauding investors and of utilizing Twitter to beforehand penny stocks without disclosing their ain income of the stocks arsenic prices rose.
As successful the national indictment, the SEC accuses Costello of fraudulent behaviour successful transportation with 2 publically traded companies helium antecedently controlled, Hempstract and GRN Holding Corp.
The SEC said successful 1 instance, Costello sold a joined mates $1.8 cardinal successful banal astatine a much than 9,000% mark-up to its price.
Ferraro, a 44-year-old Radford, Va., nonmigratory who was not charged successful the transgression indictment with Costello, did not instantly instrumentality a petition for remark from CNBC.
Ferraro is accused of utilizing the Twitter relationship with the grip @computerbux, which had astir 10,000 followers successful precocious 2019, successful the scheme.
After Costello failed to surrender Thursday, the FBI soon aft issued a "Wanted" poster featuring Costello, noting helium was a fugitive.
"He whitethorn beryllium traveling with his wife, Katrina Rosseini, who is not a fugitive," said that poster, which included aggregate photos of Costello, immoderate of which included Rosseini.
The poster noted that the mates mightiness beryllium traveling with their tiny dog, who is named Harry.
On Tuesday night, Costello was arrested by an FBI Swat squad successful El Cajon, Calif., successful San Diego County, according to Emily Langlie, a spokeswoman for the U.S. Attorney's Office for the Western District of Washington.
On Wednesday morning, Costello was taken to a infirmary aft complaining of wellness issues, Langlie said.
It is not yet known erstwhile helium volition marque his archetypal quality successful national tribunal successful California.
Costello's apprehension was invited quality to Steven Selna, an Oakland, Calif., lawyer whose client, CCSAC Inc., was 1 of the 3 cannabis companies allegedly swindled by Costello.
CCSAC has a pending suit against Costello and his companies successful U.S. District Court for the Northern District of California, implicit his failure, contempt claims to the contrary, to wage $2.2 cardinal successful taxes to the authorities of California connected CCSAC's behalf from its relationship astatine Pacific Banking Corp.
Selna told CNBC that Costello was holding astatine slightest $2.9 cardinal that belongs to CCSAC, which helium said has a large beingness successful California done retail and organisation operations. The firm, which plans to grow to the East Coast successful 2023, believes its monetary nonaccomplishment from Costello whitethorn beryllium arsenic precocious arsenic $5 million.
The transgression indictment against Costello accuses him of fraudulently diverting $300,000 of CCSAC's wealth deposited with Pacific Banking to acquisition shares successful a publically traded ammunition institution successful 2019 for the purposes of yet completing a reverse merger with Costello's then-privately held company, GRN Holding Corp.
GRN's shares became publically traded arsenic a effect of that merger.
GRN Holding's astir caller SEC filing says that Costello resigned arsenic CEO of the institution successful April, the aforesaid period that helium solder 144 cardinal shares of GRN Holding to its existent CEO for $140,000.
The indictment besides says that astatine assorted times during Costello's alleged schemes, helium described different institution helium ran, GRN Funds LLC, arsenic having much than $1 cardinal nether management, and $600 cardinal nether deposit.
That assertion was not true, the ailment says.
According to the indictment, a justice successful the civilian lawsuit filed against Costello by CCASC past period ordered him to state nether the punishment of perjury the sanction of the fiscal institution, and different details astir the relationship wherever the equilibrium of CCSAC's funds was being held.
Costello submitted a sworn declaration saying that astatine slightest $2.9 cardinal successful CCSAC's funds were being held successful a recognition national successful Tacoma, Wash., successful the sanction of GRN Funds LLC, the indictment notes.
But contrary to that claim, the GRN Funds checking relationship astatine the recognition national "has a equilibrium of $15.35 arsenic of September 9, 2022," the indictment said.
"All we're funny successful is getting our client's wealth back, and if it facilitates that it's a bully thing," Selna said.
The lawyer besides said that Costello, successful dealings with CCSAC, "certainly presented himself arsenic being highly palmy successful this industry, and that helium would support our client's money. And that wasn't true."
The indictment says that erstwhile Costello solicited funds from investors, helium made mendacious claims that included saying helium graduated from the University of Minnesota and had a master's grade successful concern medication from Harvard.
He besides claimed to person done 2 tours successful Iraq arsenic a subordinate of the Special Forces, and been changeable twice, leaving shrapnel successful his leg, the ailment says.
Costello besides falsely said "he was a billionaire"; "he managed wealth for affluent individuals, including a Saudi sheikh"; and "he had 14 years of acquisition connected Wall Street," the indictment said.
"None of that is true," a property merchandise by U.S. Attorney Brown's bureau said.
The indictment says that successful 2019, erstwhile an online nonfiction questioned Costello's statements astir his education, helium had GRN Holding Corp. contented an 8-K filing with the SEC which stated that Costello "was a postgraduate of Winona State University with a grade successful Public Administration who attended Harvard University but did not graduate."
"This connection was besides misleading," the indictment said. It noted that "Costello lone took 1 people successful Harvard's continuing acquisition program."
That aforesaid year, Costello had GRN Holdings contented a property merchandise stating it had non-binding letters of intent to get astatine slightest 10 companies, and that successful the pursuing months issued 10 property releases announcing the completion of owed diligence for each company, the indictment said.
Filings by GRN Holding with the SEC besides reflected those claims.
But "GRN Holding Corporation ne'er completed the acquisitions of the companies, adjacent though Justin Costello was an affiliate, shareholder, owner, oregon manager of each company," the indictment said.
"Most of the companies were alternatively acquired by Renewal Fuels Inc., different [over-the-counter market-]traded institution controlled by Justice Costello."
And contrary to Costello's claims to investors successful GRN Holdings, "the companies had small oregon nary gross oregon assets," the indictment said.
Between July 2019 and May 2021, "over 7,500 investors purchased and sold GRN Holding Corporate banal portion Justin Costello was making, and continuing to beryllium made, the worldly misrepresentations concerning GRN Holding," the indictment said.
"Collectively these investors mislaid astir $25 million."
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