Marijuana financier Justin Costello arrested after federal fraud indictments

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Marijuana finance executive Justin Costello, former CEO of Seattle-based GRN Funds, has been arrested after allegedly going on the run following a criminal indictment by the U.S. Department of Justice.

Costello was arrested by the FBI on Wednesday in El Cajon, California, CNBC reported.

The FBI said Costello failed to appear at its San Diego office to surrender himself.

The former Washington state resident was indicted Sept. 29 by the U.S. attorney’s office in the Western District of Washington.

“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,” U.S. Attorney Nick Brown said in a statement.

“In truth that picture was a mirage.”

A summary of the 25-count indictment alleges that Costello, through a company called Pacific Banking Corp., “diverted money from three marijuana businesses to benefit himself and his companies.”

Federal prosecutors also allege that Costello lied to investors about his wealth, his education, military service and the assets under management by GRN Funds, according to CNBC.

“In all, some 29 investors invested directly with Costello and lost $6 million because they relied on Costello’s false representations,” federal prosecutors said.

Costello is also alleged to have manipulated GRN Holding Corp.’s share price and to have “hired an unindicted co-conspirator to use Twitter in a pump and dump stock scheme.”

The U.S. Securities and Exchange Commission is also taking civil action against Costello, having filed a complaint in the Western District of Washington on Sept. 29.

The regulator charged that Costello used “a false persona, as a Harvard-educated military veteran and hedge fund billionaire, to defraud investors out of millions of dollars,” according to a news release.

Costello “brazenly used fictitious accomplishments to win over investors and directed numerous manipulative stock promotion campaigns,” Sheldon Pollock, an SEC associate regional director for New York, said in a statement.

The SEC’s lawsuit against Costello also names his associate David Ferraro, alleging that the two engaged in illicit “stock promotion schemes” on Twitter in violation of federal securities laws.

The SEC is seeking penny-stock bars against both men as well as a director bar against Costello.

Anyone with information about Costello’s alleged frauds, or who believes they were a victim, is encouraged to contact the FBI at