A former Bellevue man was arrested Tuesday near San Diego for allegedly bilking cannabis businesses and investors of millions of dollars via a scheme involving shell companies, stock pumping and a made-up life story of a military vet-turned-billionaire.

Justin Costello, 42, of Las Vegas, was nabbed in a remote area east of San Diego by FBI SWAT agents after failing to turn himself in on Sept. 29, an FBI spokesperson said Thursday.

Costello, who faces a 25-count indictment for wire fraud and securities fraud, is charged with stealing $3.7 million from three cannabis businesses. He’s also accused of tricking other victims into investing in separate ventures by passing himself off as a Harvard-trained financial whiz with 14 years of Wall Street experience and assets of $1 billion.

“Mr. Costello allegedly told many tall tales to convince victims to invest millions of dollars — money he then used for his own benefit,” said Nick Brown, U.S. Attorney for the Western District of Washington, where the charges were filed. “In truth, that picture was a mirage.”

It wasn’t clear Thursday afternoon whether Costello has an attorney. He is scheduled to appear Friday in federal court in California but the case will be tried in federal court in Washington, U.S. Attorney’s Office spokesperson Emily Langlie said in an email Thursday afternoon.

Costello faces a related civil action by the Securities and Exchange Commission.


Fraud and fabrication

According to an indictment filed by Brown on Sept. 28, Costello carried out some of the fraud via his company, Pacific Banking, which offered banking services to cannabis businesses in Washington, Colorado, California, Illinois and Alaska.

From 2019 to 2021, prosecutors say, Costello diverted funds from three of those businesses, which together lost about $3.7 million.

Costello also ran elaborate stock schemes, prosecutors say.

He bought companies whose shares “were trading for pennies,” renamed them and then persuaded dozens of victims to invest millions of dollars, prosecutors say.

Costello’s pitches to investors were rife with fabrication — not only about the finances of his holdings, but also about his own background. These included that he had a Harvard MBA, was wounded during two tours in Iraq, and owned a private equity and hedge fund with $1 billion in assets under management. 

“None of that is true,” the U.S. Attorney’s Office noted Thursday. In all, 29 individuals invested directly in Costello’s companies and lost $6 million, prosecutors say.

Stock fraud

Costello engaged in “pump and dump” tactics. He used inflated financial claims, misleading news releases and social media to drive up share prices for various companies before secretly selling off his stakes in those companies, prosecutors say.


Dumping can mean large profits for the dumper — in one case, Costello sold his shares for more than $355,000 in profit, prosecutors say — but can also hurt other investors by crashing the share price. Costello’s stock schemes resulted in losses of around $25 million for some 7,500 investors, prosecutors say.

In all, Costello’s schemes resulted in losses of around $35 million, federal officials say.

Costello wouldn’t be the only former Washingtonian accused of fabricating his résumé to bilk investors.

In 2019, former Newcastle resident Keenan Gracey was sentenced to 15 years for an elaborate stock scheme that squeezed $6.1 million from 107 victims in Washington and California.

Gracey reeled in many of his victims by presenting himself as a 6-foot-9-inch Oxford-educated professional athlete and British aristocrat with access to multimillion-dollar stock deals.

In fact, Gracey was a Canadian national who used a fake British accent, had never been to college and wore lifts in his shoes.