Cannabis conman Justin Costello in May was sentenced to 12 years in prison and three years of supervision for securities fraud following a sentencing hearing in Seattle that included statements from victims describing how badly Costello’s schemes upended their lives, including one woman whose husband committed suicide after falling for Costello’s scheme.
The sentence from U.S. District Judge Ricardo S. Martinez, who said at the hearing that Costello’s crimes “caused a severe impact financially, and a severe emotional impact” was two years longer than requested by prosecutors.
“People felt betrayed and violated by (Costello’s) actions,” Martinez said at the hearing, according to a press release from the U.S. Attorney’s Office, Western District of Washington.
Costello in January pleaded guilty and admitted in his plea agreement that he victimized marijuana business owners, private investors and investors who purchased stock in the public market. As part of the agreement, Costello also agreed to pay at least $35 million in restitution to the victims of his fraud.
As part of his securities fraud scheme, Costello purchased two companies that were trading for pennies on the over-the-counter market and renamed them GRN Holding Corporation and Hempstract Inc. Costello, 42, recruited investors in these companies, allegedly making numerous false statements.
Costello also told potential private investors that he had an MBA from Harvard, that he was a billionaire and that GRN Funds LLC, a private equity and hedge fund he owned, had more than $1 billion in assets under management, among other things. None of that was true.
During his time in the Washington cannabis industry, Costello became well known in the state for telling wild stories about his wealth, his love life and being shot twice during his time serving in Iraq (Costello did not serve in the military) — as well as using smaller lies like having a wife and children — in order to gain the confidence of those in the industry. Also, while in Washington, he had a run-in with the law in which he threatened police officers, made a name for himself by purchasing a $10,000 24-karat gold leaf cannagar, announced plans to deliver cannabis by drones and even sponsored a charity event for the announcer of a Seattle sports team.
Victim statements about Costello’s fraud
Both the sentencing memorandum from prosecutors and the sentencing hearing featured extensive statements from victims detailing their financial losses and the emotional impact Costello caused on their lives. One victim, a disabled man who served in the military, was unable to pay for back surgeries due to Costello while another lost college and retirement funds, often resulting in “great emotional and psychological harm and damages to the victims’ relationships with friends, family and others.”
“I have lost trust in people and have been unable to sleep or eat properly since discovering his fraudulent actions. The stress and anxiety caused by this ordeal have affected my ability to function normally,” wrote one victim.
“In a time of my life where I should be looking towards retirement, I have to question other peoples’ morals and character,” wrote another.
During the hearing, victims were even more direct, with victims describing how Costello preyed on friendships to get money from his victims.
“Nothing with Costello was real,” one victim told the court, according to the release. “We were groomed by this predator.”
“He is a liar, a financial psychopath, and a human wrecking ball,” said another.
A third victim told the court that her husband was a changed man after losing all of their money investing with Costello, describing how her husband became depressed and took his own life.
Martinez recognized the emotional distress of Costello’s crimes as part of the sentencing.
“Financial crimes where the defendant befriends the individual and uses them to entice others to the scheme has a completely different emotional impact. It leaves victims feeling helpless and hopeless.”
Public crimes
Along with stealing from friends, Costello’s fraud extended to the public market as well, including press releases and securities filings made with multiple false representations. Between July 1, 2019, and May 18, 2021, more than 7,500 investors purchased and sold GRN Holding Corp. securities while Costello was making, and causing to be made, material misrepresentations concerning GRN Holding Corp. Collectively, these investors lost approximately $25 million. Similarly, with Hempstract Inc., he made false statements and defrauded investors. Between November 2018 and June 2021, 29 private investors lost about $6 million.
Also, between October 2019 and January 2021, Costello hired an unindicted co-conspirator to use Twitter in a pump-and-dump stock scheme. Costello would acquire the penny stock of a company and then instruct his prolific Twitter user to tweet falsehoods about the company that would drive up the stock price. In one instance Costello also instructed some of his “investors” to purchase stock in the company, driving the share price from a nickel to $2 per share. After driving the share price up, Costello sold the shares for a profit of more than $355,000 with a share going to the Twitter user. In all Costello made $625,092 in the pump-and-dump scheme.
Along with the securities fraud, in 2017 Costello owned and operated a company called Pacific Banking Corp. that provided banking services to marijuana businesses in Washington, Colorado, California, Illinois and Alaska. Costello sent false account statements to the marijuana businesses but between 2019 and 2021, he diverted money from three cannabis business to benefit himself and his other companies. The three cannabis businesses lost approximately $3.7 million.
On the run
Following his indictment, Costello failed to appear in court and went on the run, appearing briefly on an FBI wanted list before being tracked down and arrested in Southern California in October 2022 after failing to turn himself into a Seattle court.
When found, he had a backpack that prosecutors described as a “fugitive preparedness kit” that included a Washington state driver’s license with his photo and a fake name, $60,000 in cash, gold bars, Mexican pesos, two designer watches and gem-encrusted jewelry, all of which have been forfeited as part of the agreement.
Victims during the sentencing hearing also told the judge that upon release, they expected Costello to go back to the desert where he was captured to dig up money he had buried before he was arrested.
“His flight to avoid prison demonstrates that is exactly where he belongs,” Richard A. Collodi, special agent in charge of the FBI’s Seattle field office, said in a press release. “I applaud the work of our investigators and prosecutors who finally put an end to his elaborate fraud, and to our partners who were able to apprehend him before he could leave the country.”