Fugitive claiming to be Harvard-educated billionaire arrested in $35M fraud scheme
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A fugitive, who claimed to be a Harvard-educated military veteran and hedge fund billionaire, was arrested in a scheme to defraud thousands of investors out of $35 million, according to the U.S. Attorney's Office.
Las Vegas resident Justin Costello, 42, was arrested by an FBI SWAT team in San Diego Tuesday night after several days on the run, according to authorities.
A federal arrest warrant was issued for Costello on Sept. 28, in the U.S. District Court, Western District of Washington in Seattle after he was charged with 22 counts of wire fraud and three counts of securities fraud. Costello failed to self-surrender to the FBI in San Diego on Sept. 29, authorities said.
"He may be traveling with his wife, Katrina Rosseini, who is not a fugitive," a "Wanted" poster featuring photos of Costello said.
According to the indictment, Costello, who previously lived in Bellevue, Wash., convinced investors he was building a cannabis conglomerate. Costello owned and operated a company called Pacific Banking Corp that provided banking services to marijuana businesses in Washington, Colorado, California, Illinois and Alaska. Between 2019 and 2021, Costello allegedly diverted about $3.7 million from three marijuana businesses to himself and his companies, the indictment said.
"Mr. Costello allegedly told many tall tales to convince victims to invest millions of dollars - money he then used for his own benefit," said U.S. Attorney Nick Brown.
To lure potential private investors, Costello allegedly claimed he was a billionaire, had an MBA from Harvard, had done two tours in Iraq and was wounded twice. He also told investors he had 14 years of experience on Wall Street and that GRN Funds LLC, a private equity and hedge fund he owned, had over $1 billion in assets under management, according to Brown who said "none of it is true."
"In a complex scheme involving shell companies, penny stocks and financial services for marijuana businesses, Mr. Costello used Twitter, press releases, securities filings and claims of great wealth to paint a picture of fabulous financial success," Brown said. "In truth that picture was a mirage."
The Securities and Exchange Commission conducted its own investigation and has charged Costello and his associate, David Ferraro, for promoting the stock of several microchip companies on social media without disclosing their own simultaneous stock sales as market prices rose.
In one instance, Costello allegedly sold a married couple $1.8 million in stock at a more than 9,000% mark-up over its original price.
"As we allege in the complaint, Costello brazenly used fictitious accomplishments to win over investors and directed numerous manipulative stock promotion campaigns," Sheldon Pollock, associate regional director of the SEC'sNew York Regional Office, said in a statement.
"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."