The Securities and Exchange Commission is investigating Justin J. Costello’s cannabis company GRN Funds ($GRNF-$DCGD) according to a new securities fraud suit filed in King County, Wa. state court.
A Washington-based couple who invested over five million with Costello and his cannabis companies said they got a SEC subpoena in January 2020 and Costello allegedly asked them to lie to the securities regulator about who controlled trading in their account.
Costello has been promoting himself as a mega millionaire Cannabis executive and deal maker for at least the last four years but the new lawsuit says nearly everything about his resume is a fanciful misstruth.
Costello, age 39, from Bellevue, Wa. took majority control over a penny stock mining company he’d invested in with prospect digs in Ghana called Discovery Gold Corp in 2019 and turned it into a shell company that says it will be buying a cannabis company.
Between 2012 and 2018 no revenue was generated in $DCGD and the number of outstanding shares increased from less than 50 million to over 240 million. Discovery Gold is the subsidiary of GRN Holdings which is controlled by Costello. In 2019 the stock went from trading at pennies to over $2 on the OTC Markets.
In January 2019, James and Brenda Meckley were introduced to Costello by friend who knew they wanted to get into investing in the Cannabis market. Costello, who was introduced to the couple as a self-made hedge fund billionaire, charmed the Mechley’s over dinner with his tales of a Harvard MBA education, a future Forbes billionaire cover story, and war time injuries whilst serving in special forces. He even said during the Iraq war he worked for Halberton, directly under Dick Cheney and at one point was given responsibility of overseeing hundred of millions of dollars that went into all of Halberton’s war rebuilding contracts. Costello also said his company was a registered investment advisor and was managing money for other high net worth individuals.
As a result in early July 2019, the Mechleys made their first investment of $250,000 for half a million shares in GRN Holdings. Then, a few days latter put $4 million into a TD Ameritrade account and gave Costello control over stock buying decisions. At the end of July, Costello then convinced the Mackley’s to make a private stock purchase agreement to buy 9 million shares of Discovery Gold $DCGD. GRN was touting becoming the biggest Cannabis conglomerate and would start by buying a company Costello owned called SeedScience CBD who had the only laboratory operating to FDA standards.
Costello started trading in the Mackley’s TD account and charged them the next month around $30k for 20% of the profits he had alleged made them. The Mackley’s latter learned Costello was using their money to trade in his own penny stocks. TD eventually shut down the account for suspicious behavior and Costello claimed it was because the account was flaged by an algorithm because it was making to much money. So the Mackley’s opened a new account at Fidelity and once again gave Costello control.
When the SEC came knocking on the Mackley’s door this January, with a subpoena asking about trading in $DCGD alarms went off. Costello tried to convince them to use his own lawyer to answer the SEC subpoena but the Mackley’s declined saying they would use their own attorney. Brenda Mackley was also asked to lie by Costello; he wanted her to say she made the trading decision which she didn’t. Mrs. Mackley refused to do this. The couple eventually got copies of stock certificates that they had been demanded which came from Utah based Action Stock Transfer company.
Filings with the SEC show Justeen Blankship is the president of the transfer agent company whose website is nothing more than a banner ad with no contact info.
The Mackley’s lawsuit say they now believe the stock certificates they got are fake and definitely worthless. They have never received any financial payments or reimbursements from Costello or GRN Funds as promised and learned Costello’s resume reads like a con-man including the fact that he was never registered at Harvard Business School. Action Stock Transfer was emailed for comment on if they have also gotten an SEC subpoena. They didn’t answer.
Justin Costello has been quoted as an expert and deal maker in cannabis publications such as MJ Biz Daily. In 2017 he told MJ Biz he had brokered 80 plus cannabis deals, which isn’t true according to research reviewed by Cannabis Law Report. MJ Biz apparently doesn’t fact check their experts.
GRN Holding is currently trading below 10 cents. In its last quarterly financial filed on September 21, 2020 with the SEC it mentioned other civil litigation but didn’t disclose the SEC investigation. The Mackley’s securities fraud suit was filed on November 24, 2020. There has been no response from Costello or a notice of who he will be using as an attorney.
Last year a short selling fund called Utopia Capital Research published an indepth look at $GRNF and Costello pointing out all the public mistruths Costello has made and doubted GRN Holdings would ever complete any of the acquisitions it says it has signed letter of intents for. Additionally, it pointed out the acquisitions were of companies Costello owns or is invested in. The last 8-k $GRNF filed said its board voted once again to issue more shares.
There’s a fantastic GRN Fund Twitter “Fanpage” that’s well worth a read.
Here’s a taster, just click on the image to read more.