A former fugitive accused of falsely telling investors he was a billionaire, a Harvard MBA, and a special forces veteran appears set to plead guilty on Wednesday in connection with an alleged $35 million fraud, a court filing suggests.
Would-be cannabis mogul Justin Costello, 42, is accused in federal court in Washington state of swindling thousands of investors and others with a slew of bogus and extravagant claims about himself
Costello, who fled after learning he had been indicted in late September, has been held without bail since early October when an FBI SWAT team arrested him in a remote area outside San Diego.
At the time, authorities said, he was carrying a backpack containing $12,000 worth of gold bars, $60,000 in U.S. currency, $10,000 in Mexican pesos and an ID featuring his photo and someone else’s name.
Costello later pleaded not guilty in the case.
But a court filing says Costello is now scheduled to appear for a change of plea hearing on Wednesday in U.S. District Court in Seattle. Such hearings are typically scheduled when a defendant plans to plead guilty.
Costello’s lawyer, Dennis Carroll of the federal defender’s office, wrote, “No comment at this time,” when CNBC emailed him to ask about the hearing.
Emily Langlie, a spokeswoman for the U.S. Attorney’s Office for the Western District of Washington, which is prosecuting Costello, declined to comment.
Costello is charged with 22 counts of wire fraud and three counts of securities fraud in his criminal case. He also faces civil charges filed by the Securities and Exchange Commission in a separate lawsuit accusing him and another man of defrauding investors in a penny stock promotion scam.
Nick Brown, the U.S. Attorney for the Western District of Washington, has previously said that Costello “allegedly told many tall tales to convince victims to invest millions of dollars — money he then used for his own benefit.”
Prosecutors say Costello used one of his companies, Pacific Banking Corp., to illegally divert at least $3.6 million to himself and other firms he owned while offering banking services for three marijuana companies.
Cash and gold bars as detailed in court filing in US District court in San Diego in case of former fugitive Justin Costello.
Source: US District Court
They also accuse him of a scheme that cost more than 7,500 investors about $25 million by making false claims about purported plans by one of his firms to purchase nearly a dozen other companies. Almost 30 investors lost $6 million after directly investing with Costello based on his false claims.
The indictment of Costello says that he falsely claimed to have graduated from the University of Minnesota, to have a master’s degree in business administration from Harvard, to have served two tours as a member of the U.S. special forces in Iraq, and to have been wounded during that time.
Costello also falsely claimed to be a billionaire, to have managed money for wealthy people who included a Saudi sheikh, and to have had “14 years of experience on Wall Street,” according to the indictment.