I recently read a civil complaint filed in Washington State Superior Court in which a local couple alleges that a man named Justin Costello defrauded them for about $5 million in an investment scheme involving cannabis and CBD.
According to the complaint, Costello, the founder of GRN Funds, misrepresented himself as a “self-made hedge fund billionaire” and financial whiz. He’s been around the legal cannabis industry for a while in the Pacific Northwest and is pretty well known for some over-embellished tales about his life and background. The civil complaint alleges he claimed to have been shot twice while serving in the special forces, had an MBA from Harvard, was the youngest hedge fund billionaire ever, manages all expenditures of a Saudi prince’s family and that he worked directly for former Vice President Dick Cheney at Halliburton.
In other words, Costello tells an impressive, but hard to believe story about himself.
When I first met him about five years ago, he was obviously trying to impress people and said he was selling a chain of Seattle cannabis stores to hedge fund friends in New York City for $60 to $70 million.
When I asked him if I could see the store’s audited financials, he didn’t know what audited financials were. That did it. As far as I was concerned, he was exposed. After all, no real investor would ever consider buying a business without seeing audited financials from a reputable CPA firm.
What amazes me is that several other publications in this industry including MJBiz Daily and High Times ran stories on Costello and his business ventures, apparently without looking into his claims.
But that’s often the case, isn’t it? The bizarre thing about scammers is that they can spin an elaborate yarn that often works. Why? Because the folks who get sucked in are invariably hearing something they want to hear. Whether it’s a journalist chasing a story or an investor looking for a get-rich-quick scheme, people can get swept up in the hype and bullshit of something they want to believe.
And this can work on an enormous scale. Look no further than Donald Trump for evidence.
Most people in this country saw the enormous red flags around Trump very quickly. His refusal to show his tax returns, his history of fraud (Trump University), his lies about the Moscow hotel deal, his payoff to Stormy Daniels, his secret support from Vladimir Putin, the criminals he associates with (Michael Flynn, Paul Manafort, Roger Stone), the bankrupt casinos, the discrimination lawsuits, the family charity that stole money from a cancer nonprofit, etc.
However, if you want to believe badly enough that he can bring back coal jobs or restore American pride or bring back manufacturing jobs, you can be easy prey for a guy with a long history of lies and deceit, and people like Trump know it.
Education is one of the keys to avoid being scammed. The more you know and the better your education, the less likely you are to be fooled. (There’s a reason Trump did not do well with folks that have a college degree.)
Now, I’m not claiming to be the smartest guy in the world. However, I do have a business background and pay attention to the news. And I tend to be skeptical when anybody talks about “easy money.”
So when Justin Costello told me he didn’t know what audited financials were, the game was up in my mind.
Remember, there’s no free lunch and if things sound too good to be true, they probably are. Even in cannabis. The writing is usually on the wall for anybody bothering to look.