How conman Justin Costello made his way through the Washington cannabis industry
Justin Costello was well-known in Washington’s cannabis industry. He was a big personality with big plans, big money and a big mouth.
He told people he was rich and had famous friends. He had an MBA from Harvard, had seen combat in Iraq and owned a private jet.
Vicki Christophersen, executive director of the Washington CannaBusiness Association, recalls a 2019 meeting in which Costello pledged funding for her group: “Now it’s frickin’ hysterical,” she says. “He’s like, ‘Well, I’m a billionaire.”
Costello had plans to become a cannabis tycoon, with schemes that ranged from banking services to a billion-dollar stock play to automated drones that would deliver up to 85 pounds of cannabis from licensed wholesalers to cannabis dispensaries in the Pacific Northwest.
“So you know the movie The Godfather, right?” says the CEO of one licensed cannabis company who wished to remain anonymous. “The Godfather is based off the life of Frank Costello, the head of the five crime families in New York, and Justin was a great-grandson of Frank Costello. He told everybody that.”
But, of course, none of it ended up being true.
“When we asked his mom that question, she was like, no, no one in our family has ever been in organized crime,” says the CEO.
“It was just one excuse after another,” Christophersen says of trying to collect the money Costello promised. “Just a lot of promises and then nothing. And then I started hearing from other people in the industry who had been made a lot of promises too.”
So it was not a surprise to many in the Evergreen State when on October 4, 2022, after a brief period on the run from the FBI, Costello was arrested in Southern California on 22 felony counts of mail and wire fraud and three felony counts of securities fraud in a nearly $35 million fraud case that could cost him millions in fines and up to 20 years in prison.
“Whoever makes it out of all those lies?” asks the CEO. “Like, no one.”
The Schemes: ‘A mixture of both’
The lies chasing Costello were plentiful.
According to the 37-page indictment handed down September 28 by the U.S. District Court for the Western District of Washington, Costello, 42, not only lied about his background, his family and his wealth, he allegedly did it to defraud business owners within the cannabis industry, as well as investors looking to be a part of it.
Costello told investors that the was a twice-wounded Iraq special forces veteran, as well as a self-made billionaire with an MBA from Harvard who spent 14 years on Wall Street and had managed money for many individuals including Saudi sheiks. He also told them his company, GRN Funds, LLC, was a private equity fund and hedge fund with more than $1 billion in assets under management.
According to the indictment, Costello in 2017 owned and operated a company called Pacific Banking Corp. that provided banking services to marijuana businesses in Alaska, California, Colorado, Illinois and Washington. Between 2019 and 2021, Costello allegedly diverted money from three marijuana businesses to benefit himself.
“And we’ve alleged that he diverted at least $3.7 million of three marijuana businesses’ money to other purposes,” says Assistant U.S. Attorney Justin Arnold, adding that Costello promoted his company as a “go between” connecting cannabis businesses with the traditional banking industry, which typically does not deal with the still-federally illegal business.
According to the Department of Justice, as part of his 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., then recruited investors with his tall tales.
Costello used the same lies with other investors and allegedly used investor funds for his own expenses, including at least $42,000 for costs associated with his wedding. In all, some 29 investors invested directly with Costello and lost $6 million because they relied on Costello’s false representations.
In 2019, Costello’s GRN Funds, LLC purchased the outstanding shares of Discovery Gold Corp., changing the name to GRN Holding Corp., and continued to lie about his background on SEC filings, as well as lying about possible acquisitions to boost share prices. None of the acquisitions occurred even though Costello controlled these other companies. Between July 2019 and May 2021, 7,500 investors lost about $25 million after purchasing and selling GRN Holding Corp. stock.
“Mr. Costello solicited private investors in the Puget Sound area to invest in his companies, including companies that he was intending to do reverse mergers on and make them publicly traded,” Arnold says. “And then, the allegation is that he took private companies and did reverse mergers with publicly traded shell companies and made similar misrepresentations to the broader public through those public filings with the SEC or press releases.”
Then there was the pump-and-dump scheme in which Costello hired an unindicted co-conspirator (named in a concurrent SEC complaint) engaged in various stock promotion schemes in which Costello acquired shares of penny stocks and then directed his partner to promote those stocks to his partner’s Twitter followers and the public, netting approximately $792,000 in illicit trading profits.
During his 15 years as a U.S. attorney, Arnold has dealt with plenty of securities and wire fraud cases, but this was his first involving the cannabis industry. Typically, with this type of fraud case, people are either engaged in fraud related to publicly traded securities or they’re lying about themselves to get money from associates, Arnold says.
Costello’s alleged crimes are “kind of a mixture of both,” he says.
Getting in
While many of Costello’s lies are over the top, they seem to have started smaller and more personal. When he first arrived in Washington, he was like any other entrepreneur, looking to make a buck in the newly legal cannabis industry.
DJ Johnson, CEO of a cannabis sales and marketing company in Washington, met Costello in Spokane, where the alleged conman promised both money and a connection to a programmer to help Johnson develop an idea he had of an ordering platform for the industry.
Costello, of course, presented himself as a rich businessman who had attended Harvard and owned a private jet.
“I get introduced to him, and he just instantly starts feeding me all these lies,” Johnson says.
Through Johnson, Costello began to meet other cannabis entrepreneurs. Costello told one group of retailers that, for a small investment, he could roll up their stores as part of a huge sale, promising tens of millions of dollars in profits. He also said he could provide credit card processing for cannabis retailers, something many promised but were unable to deliver to the cash-only industry.
But after several months of getting what he felt like was a “song and dance” — and never seeing the private jet — Johnson was overwhelmed with suspicions. He began urging others not to invest with Costello and helping to get friends’ money back.
But it was the more personal lies that really tipped Johnson off, including that Costello was married and had two kids. Johnson, who does have a wife and son, thinks it was a way for Costello to work his way in, by pretending they were alike.
“This is how crazy this guy is: he texted me, ‘Hey, tell Johnny that if he leaves his toys on the floor again, I’m gonna take them away and he’s grounded,’” Johnson says. “And I hit him back. I go, ‘Hey, was that message for me?’ And he goes, ‘Oh, sorry. I was trying to send that to my wife.’ And I knew he didn’t even have a wife at that point.”
The anonymous CEO says Costello told everybody he had two kids.
“That was the biggest lie that he told in the beginning,” he says. “And I think he did that just so people would see him more as a stable family guy.”
Costello’s “Belarusian wife” was real, though at the time, the pair were unmarried. When they eventually did get married, money allegedly stolen from investors was used to fund the wedding. (Costello’s wife was initially named as part of his wanted poster when he failed to turn himself in, though she was not wanted and her name was subsequently removed from the poster. According to reports, she was on the East Coast at the time of his arrest.)
But those stories were always designed to give him credibility, says the CEO, a way to get in with the right people and learn the industry and its players.
“He played to whoever he was with. He played humble when he had to play humble, he played cocky when he had to play cocky,” the CEO says.
With the CEO, a former Marine who served in Iraq, Costello played up the military angle. While Costello didn’t claim to be a veteran, he portrayed himself as a member of the General Services Administration, an independent agency that works as a go-between for the military and the government. He wove impressive tales of his time in Iraq, from being shot twice — once in the leg and once in the chest while wearing a flak jacket — to having an RPG blow up in front of him, tearing the skin off his hands and face.
“The helicopter in front of him got blown up, and it was his commander,” remembers the anonymous CEO. “And when they landed, (vice president) Dick Cheney called him on the phone and said, ‘You’re the new money guy in Iraq.’”
But again, it was all a series of lies, each one seemingly more fantastic than the one it proceeded.
The CEO and others eventually contacted Costello’s mother, who he says told them Costello had never been in Iraq or served in any part of the government. What might appear to be scars from the explosions were merely a skin condition he had had since he was a child.
Growing Notoriety
As his notoriety grew, Costello grew flashier, becoming known throughout the industry for his over-the-top personality. To at least one cannabis executive, he sent pictures of himself, shirtless in a boardroom with a pair of handguns tucked in his waistband. On another occasion, he dropped $10,000 on the one-ounce, 15-inch, 24-karat gold-wrapped cannagar known as “El Dorado” after meeting the owner of the high-end retailer that featured it.
Then there was the list of celebrities he said he knew or had slept with.
“He said he was dating Jennifer Garner while Ben Affleck was in rehab,” said the anonymous CEO.
Costello also made a splash in the larger community, sponsoring charity events like Seattle Mariners broadcaster Rick Rizzs’ Toys for Kids in 2019.
“Up on the stage it said, ‘Justin Costello, GRN Funds billionaire, is providing these gifts and these packages to bid on,’” says the CEO.
Costello immediately issued a press release highlighting the more than $700,000 he helped raise.
There were other incidents with Costello that pointed to larger issues, such as a 2019 arrest in Snoqualmie, Washington, for allegedly threatening employees at a casino both physically and with financial and physical retribution, and then threatening the police officer, according to charging documents.
According to the documents, after his arrest, Costello repeatedly told the officer that he “messed with the wrong dude” and told officers he was a billionaire. Costello allegedly threatened to sue the officer and repeatedly asked him where he lived, telling him, “I’m going to find out who you are.”
“You should be very scared of me,” Costello allegedly told the officer. “This is going to cost you, brother, a lot of money.”
While being read his rights, Costello allegedly told another officer, “Do you know who I am, bitch? Google me, mother*cker.” During transport, Costello added, “Bro, take these handcuffs off so I can kick your ass.”
Costello refused to leave the car and the officer had to “physically move him” to the booking area, during which he again threatened the officer with a lawsuit. Following the incident, Costello was diverted from a city jail to the county jail, where he was booked on a felony count of intimidating a public servant.
He was charged with obstructing a public servant and two counts of harassment for the incident and eventually pleaded guilty to disorderly conduct and ordered to pay a fine of more than $1,000.
Fugitive preparedness kit
When the charges came from the Feds, Costello did not wait around to be arrested again. He initially agreed to turn himself over in San Diego on September 29, the day after the court issued its indictment, but that too turned out to be a lie. Instead, he went on the lam.
When he was found, in “a remote area of El Cajon, California,” Costello was had with him what Arnold described as a “fugitive preparedness kit,” including $60,000 in cash (banded in $10,000 increments), six one-ounce gold bars, multiple banking cards and check books and a Washington state driver’s license with his photo and one more lie, the alias “Christian Joseph Bolter.” Photographs also show jewelry, including a gold gun on a large gold chain and a pair of watches, a stack of pesos and multiple credit and debit cards.
According to the charging documents, the gold was part of a larger purchase of $94,000 in gold in April, using money stolen from a banking client.
“The gold purchase is one of several steps that Costello took in preparation to prepare for his apparent plan to live without detection by law enforcement, if not flee law enforcement entirely,” reads the document for Costello’s detention hearing, noting that he also stopped using personal bank accounts. The FBI attempted to track Costello’s cell phones, but were unsuccessful, causing them to conclude he was taking “countersurveillance measures to prevent being tracked.” Instead, they tracked his Alfa Romeo. When agents contacted him, he said he was surprised they found him because he had turned his phone off. He also told agents he had had a stroke, and that was why he didn’t turn himself in, but the agents noted no impairment of any kind. Costello told agents he could have outrun the SWAT agents if not for the stroke and again implored them to Google him to read about the case.
‘All twos’
A Washington cannabis lawyer familiar with Costello and his case says he was surprised at the level of specificity and “great deal of evidence” to be found in the court documents. The attorney, who never represented Costello, but did represent cannabis business owners who knew him, said he had “never seen anything so brazen” and speculated that was one of the reasons he was taken seriously inside an industry that wanted to believe he could solve their banking issues.
“You can’t even contemplate that somebody would engage in that level of blatant, open deception,” said the attorney. “It’s almost like a grift from a TV show.”
The attorney said the cannabis industry not only wanted to listen to the potential solutions Costello had, but that he also knew the ins and outs of both the banking and cannabis businesses. And while the promises of credit card solutions or money management may have been too good to be true, “people want to believe.”
“There was some element of credibility,” he said.
“He spoke the language, for sure, and I think he spoke it better than anyone else,” said the CEO. “He’s probably one of those guys that could out-think anybody in the room.”
The CEO noted repeatedly that Costello was “hyper intelligent” and credits him with figuring out how to make the schemes work, including things like getting companies listed on the OTC exchange, but says there seemed to be a switch in his personality somewhere around the charity event, after which he seemed to start believing his own hype and lies. For example, the CEO says that in the beginning, Costello didn’t portray himself as a billionaire, only a rich, Wall Street businessman. When the CEO asked him directly in 2018 how much money he had, Costello told him $10 million total, of his own and investors.
“Probably never true, obviously, in hindsight,” he says now.
But by the charity event, Costello had obviously embraced his own lies.
“And that’s probably one of the last times I saw Justin, and I saw that he was falling prey to it, that he was telling everybody he was a billionaire,” says the CEO. “I’ve known billionaires. When you’re a billionaire you don’t go around telling people you’re a billionaire.”
By 2020, the first civil suits against Costello appeared, from a company in California whose taxes he never ended up paying despite producing documents that said he had, and from an elderly couple alleging Costello swindled them out of their investment money.
Like Christopherson at WACA and Johnson — whose own relationship with Costello nearly ended in a fight one night at an industry event — the CEO did not fall prey to Costello, though he and his company were often used in marketing ploys for Costello’s schemes.
But today, all look back on their dealings with Costello as a cautionary tale for the industry.
“The guy has a silver tongue, he’s a master manipulator,” says Johnson. “It’s straight out of a movie.”
For his part, the CEO would just want to ask him “Why?” since Costello obviously could been a success in the legitimate world if he had tried.
“What was his point unless it was getting a bunch of money out of people, hiding it, doing time and then getting out and taking the money?” he says. “But he didn’t have anything. He had a deck of cards and they were all twos.”