Women, minority execs show few gains in U.S. cannabis industry, according to the latest data from the MJBiz Diversity, Inclusion and Equity Report. Get your copy here.
Justin Costello, a former CEO of Seattle-based GRN Funds, pleaded guilty on Wednesday to securities fraud after posing as a billionaire and war veteran to dupe investors into funding his cannabis-related business schemes.
Prosecutors will recommend a sentence of 10 years in prison, with Costello agreeing to that and being prevented from asking for less time, CNBC reported.
Costello, 42, also agreed to pay not less than $35 million to victims of his frauds, which included stock pump-and-dumps and a fake bank.
He was arrested by the FBI in October in El Cajon, California, after failing to appear at the FBI’s San Diego office to surrender himself.
When the FBI Swat Team apprehended Costello, he was carrying a backpack containing gold bars, $70,000 and a fake ID.
He was originally indicted on 25 counts – three counts of securities fraud and 22 counts of wire fraud.
Costello has been held in jail without bail since his arrest.
Sentencing is scheduled for April 21.
In his plea agreement, Costello admitted to defrauding investors and potential investors by lying that he had a master’s in business administration from Harvard University and that he had managed money for wealthy individuals, among other claims.
Among Costello’s scams, according to CNBC:
- From July 2019 through May 2021, more than 7,500 investors bought and sold stock in publicly traded GRN Holding Corp, according to the plea agreement, and collectively lost about $25 million.
- Roughly 30 investors lost about $6 million in Hempstract after Costello lied about the company’s business operations.
- He diverted about $3.7 million from three cannabis companies that agreed to use banking services from his business, Pacific Banking Corp.
- A pump-and-dump stock scheme in which he and an associate identified only as “D.F.” engaged in illicit “stock promotion schemes” on Twitter in violation of federal securities laws. Ferraro was not criminally charged.
The U.S. Securities and Exchange Commission still has a pending civil lawsuit against Costello in which the agency alleges he engaged “in pump-and-dumps of penny stocks,” CNBC reported.