SEC Busts Stock Scammer Claiming to be Veteran and Billionaire Harvard Grad
Target faces allegations he promoted several microcap company stocks on social media without disclosing their simultaneous stock sales as market prices rose.
The Securities and Exchange Commission Thursday charged Justin Costello with using a false persona as a Harvard-educated military veteran and hedge fund billionaire to defraud investors.
The SEC said it also charged Costello associate David Ferraro in the matter.
Both face allegations of promoting several microcap company stocks on social media without disclosing their 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. As alleged in the complaint, Costello used these fabricated accomplishments to secure approximately $900,000 of investments in two different companies from more than 30 investors.”
Regulators also alleged in their complaint that Costello, acting as an investment adviser to a married couple, sold them $1.8 million of shares in a penny stock at a markup of 9,000 percent and used their $4 million brokerage account to trade, losing a significant amount of money on microcap stocks in which he had an undisclosed financial interest.
The complaint also alleges that Costello and Ferraro engaged in various stock promotion schemes that included Costello buying shares and directing Ferraro to promote those stocks to Ferraro’s Twitter followers and the public.
The complaint alleges that Ferraro promoted the stocks without disclosing his relationship with Costello or that Costello would sell his shares when the stock rose. Nor did Ferraro disclose he would receive a share of Costello’s ill-gotten profits.
The pair together made about $792,000 in illicit trading profits.
“As we allege in the complaint, Costello brazenly used fictitious accomplishments to win over investors and directed numerous manipulative stock promotion campaigns,” said Sheldon L. Pollock, Associate Regional Director of the New York Regional Office. “This case highlights our ongoing efforts to protect investors from fraudsters posing as investment professionals and to safeguard the markets from social media schemes and other online fraud.”
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 unveiled criminal charges against Costello.
The SEC encouraged investors to use the free resources on Investor.gov to check the background of anyone selling or offering investments.