Alleged fraudster posed as hedge-fund billionaire in cannabis
Published on October 7, 2022 by oz. staff
Investing in cannabis is already risky business, even more so when charlatans are added into the mix.
The Securities and Exchange Commission announced this week it had charged Justin Costello for posing as a “seasoned, licensed investment professional who was building a conglomerate in the cannabis industry.”
Costello is said to have defrauded investors out of millions of dollars before being charged.
He was even featured in a Q&A on MJBizDaily.
“As we allege in the complaint, Costello brazenly used fictitious accomplishments to win over investors and directed numerous manipulative stock promotion campaigns,” says Sheldon L. Pollock, the associate regional director of the New York regional office of the SEC.
“This case highlights our ongoing efforts to protect investors from fraudsters posing as investment professionals and to safeguard the markets from social media schemes and other online fraud.”
Costello was arrested this week in San Diego after days on the lam.
The SEC alleges he used a false persona, as a Harvard-educated military veteran and hedge fund billionaire, to fool investors. False representations included credentials as a Harvard MBA, experience managing a $1.15 billion hedge fund, and years of experience on Wall Street, says the SEC.
He allegedly used those fabricated accomplishments to secure about $900,000 of investments in two different companies from more than 30 investors. And while acting as an investment adviser to a married couple, Costello allegedly sold the couple $1.8 million of shares in a penny stock at a markup of 9,000 per cent over the price paid by Costello and used their $4 million brokerage account to trade, at a significant loss, securities of microcap companies in which Costello had an undisclosed financial interest.
Costello is charged with violating the anti-fraud provisions of the federal securities laws. In a parallel action, the U.S. Attorney’s Office for the Western District of Washington today announced criminal charges against Costello.