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. As further alleged in the complaint, while acting as an investment adviser to a married couple, Costello sold the couple $1.8 million of shares 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. The complaint alleges that 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.
‘Enforcement 40’ for 2020
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