Home Alts News Multiple False Personas and Millions in Fraud

Multiple False Personas and Millions in Fraud

The Securities and Exchange Commission announced that it charged Justin Costello for using a false persona, as a Harvard-educated military veteran and hedge fund billionaire, to defraud investors out of millions of dollars.

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The Securities and Exchange Commission announced charges against Justin Costello for using a false persona as a Harvard-educated military veteran and hedge fund billionaire to defraud investors out of millions of dollars. The SEC also charged David Ferraro, an associate of Costello’s, for promoting the stock of several microcap companies on social media without disclosing their own simultaneous stock sales as market prices rose.

According to the SEC’s complaint, Costello portrayed himself to the public as a seasoned, licensed investment professional who was building a conglomerate in the cannabis industry. His alleged false representations included credentials as a Harvard MBA, experience managing a $1.15 billion hedge fund and years of experience on Wall Street.

The complaint alleges that Costello used these fabricated accomplishments to secure approximately $900,000 of investments in two different companies from more than 30 investors. Also, while acting as an investment adviser to a married couple, Costello sold them $1.8 million in a penny stock at a markup of 9,000 percent over the price paid by Costello and used their $4 million brokerage account to trade, at a significant loss, securities of microcap companies in which Costello had an undisclosed financial interest.

The complaint also alleges that Costello and Ferraro engaged in various stock promotion schemes in which Costello acquired shares of penny stocks and then directed Ferraro to promote those stocks to Ferraro’s Twitter followers and the public. Supposedly, Ferraro posted hundreds of tweets to hype those stocks and did not disclose that Costello intended to sell his shares once the stock price increased or that Ferraro would receive a share of Costello’s profits. Through these alleged schemes, Costello and Ferraro together made approximately $792,000 in illicit trading profits.

The complaint seeks permanent injunctive relief, disgorgement with prejudgment interest, and civil penalties. The SEC also seeks penny stock bars against Costello and Ferraro and an officer and director bar against Costello. In a parallel action, the U.S. Attorney’s Office for the Western District of Washington announced criminal charges against Costello.

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