SEC v. JUSTIN COSTELLO; and DAVID FERRARO, No. 2:22-cv-01388, Western District of Washington (Oct. 6, 2022) — Complaint

COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
SEATTLE DIVISION

SECURITIES AND EXCHANGE
COMMISSION,

                                    Plaintiff,

            v.

JUSTIN COSTELLO and
DAVID FERRARO

                                    Defendants.
CASE NO.

COMPLAINT
JURY DEMAND

Plaintiff Securities and Exchange Commission (the “SEC” or the “Commission”), for its
complaint against Defendants Justin Costello (“Costello”) and David Ferraro (“Ferraro”) alleges
as follows:

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
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SUMMARY
1. This action involves Costello’s numerous schemes to defraud investors, all of
which violated the antifraud provisions of the federal securities laws. Costello, who claimed to
be building a conglomerate in the cannabis industry, falsely portrayed himself to the public as a
billionaire with a Harvard MBA, a military veteran, and a hedge fund manager with years of
experience on Wall Street. Between at least July 2019 and August 2020, Costello used these and
other fictitious credentials to gain investors’ trust and to defraud them out of millions of dollars.
2. First, Costello disseminated materially false or misleading information about his
educational and professional credentials to the investing public, including in a Commission filing
for GRN Holding Corporation Nevada (“GRNF”), a publicly traded microcap company of which
Costello was CEO. In a press release for GRNF, Costello also disseminated materially false or
misleading information about a purported banking entity that Costello owned and that GRNF
would allegedly acquire.
3. Second, after using his fabricated accomplishments to become an investment
adviser to a married couple, Costello sold the couple $1.8 million in stock at an over 9,000
percent markup without adequately disclosing the markup to them. Costello further used the
same advisory clients’ $4 million brokerage account to trade securities of companies in which he
had an undisclosed financial interest and to conduct insider trading.
4. Third, Costello obtained approximately $700,000 in investments from 13
investors for a closely-held company that shared a name with GRNF but that was in fact a
separate, private entity owned and controlled by Costello.  As a result of Costello’s materially
false or misleading statements, investors were led to believe that they were buying shares of
GRNF, and not shares of the private entity.

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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5. Fourth, Costello obtained approximately $200,000 in investments from 19
investors for a private company that Costello purportedly planned to turn into a publicly traded
cannabis-related company. Certain of the investors attended a presentation during which Costello
again emphasized his false professional credentials, including his purported experience as an
investment banker in the cannabis industry. In addition, for at least $50,000 of the investments in
the private company, Costello misappropriated the funds by depositing them in an account for
yet a different company that Costello controlled.
6. Fifth, from at least October 2019 through January 2021 Costello and Ferraro
engaged in stock promotion schemes in which Ferraro recommended to his Twitter followers and
the public at least five microcap stocks that Costello owned. Ferraro failed to disclose that he and
Costello intended to sell shares of those stocks as the price of those stocks rose, or that Costello
would pay Ferraro a portion of his profits from those sales. Costello profited approximately
$683,000 from these schemes, of which he shared approximately $32,000 with Ferraro. Ferraro
profited approximately $41,000 from his own trading in these schemes.
7. Additionally, in July 2019, December 2019, and January 2020, Ferraro separately
conducted his own stock promotion schemes with respect to two additional microcap stocks,
generating profits of approximately $68,000.
VIOLATIONS
8. By engaging in the conduct set forth in this Complaint, Defendants violated
Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)] and Section
10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule
10b-5 thereunder [17 C.F.R. § 240.10-b5]. Costello further violated Sections 206(1) and 206(2)
of the Investment Advisers Act of 1940 (“Advisers Act”) [15 U.S.C. §§ 80b-6(1) and 80b-6(2)].

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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9. Unless the Defendants are permanently restrained and enjoined, they will
continue to engage in the acts, practices, and courses of business set forth in this Complaint and
in acts, practices, and courses of business of similar type and object.
NATURE OF THE PROCEEDING AND RELIEF SOUGHT
10. The Commission brings this action pursuant to the authority conferred upon it by
Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)], Section 21(d) of the Exchange Act [15
U.S.C. § 78u(d)], and Section 209(d) of the Advisers Act [15 U.S.C. § 80b-9(d)].
11. The Commission seeks a final judgment: 1) permanently enjoining the Defendants
from ongoing or future violations of the federal securities laws and rules this Complaint alleges
they have violated; 2) ordering the Defendants to disgorge all ill-gotten gains they received as a
result of the violations alleged herein and to pay prejudgment interest thereon pursuant to
Sections 21(d)(3) [15 U.S.C. § 78u(d)(3)], 21(d)(5) [15 U.S.C. § 78u(d)(5)], and 21(d)(7) [15
U.S.C. § 78u(d)(7)] of the Exchange Act; 3) ordering the Defendants to pay civil money
penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)], Section 21(d)(3) of
the Exchange Act [15 U.S.C. § 78u(d)(3)], and, as to Costello, also Section 21A of the Exchange
Act [15 U.S.C. §§ 78u-1(a)(1)-(2)] and Section 209(e) of the Advisers Act [15 U.S.C.§ 80b-
9(e)]; 4) prohibiting the Defendants from participating in any offering of a penny stock, pursuant
to Securities Act Section 20(g) [15 U.S.C. § 77t(g)] and Exchange Act Section 21(d)(6) [15
U.S.C. § 78u(d)(6)]; 5) prohibiting Costello from serving as an officer or director of any public
company pursuant to Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)] and Section
21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)]; and 6) ordering any further relief that the
Court may deem just and proper.

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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JURISDICTION AND VENUE
12. This Court has jurisdiction over this action pursuant to Sections 22(a) of the
Securities Act [15 U.S.C. § 77v(a)], Section 27 of the Exchange Act [15 U.S.C. § 78aa], and
Section 214 of the Advisers Act [15 U.S.C. § 80b-14].
13. The Defendants, directly or indirectly, have made use of the means or
instrumentalities of interstate commerce or of the mails in connection with the transactions, acts,
practices, and courses of business alleged herein.
14. Venue lies in this District under Section 22(a) of the Securities Act [15 U.S.C.
§ 77v(a)], Section 27 of the Exchange Act [15 U.S.C. § 78aa], and Section 214 of the Advisers
Act [15 U.S.C. § 80b-14]. Certain of the acts, practices, transactions, and courses of business
alleged in this Complaint occurred within this District. Among other things, Costello made
certain of the false statements described herein, and placed certain of the trades described herein,
while physically present in this District. Costello also made certain transfers to Ferraro from
bank accounts owned by entities located in this District and engaged in stock promotion schemes
with Ferraro while within this District.
DEFENDANTS
15. Costello, age 42, currently resides in La Jolla, California. Until August 2022,
Costello was the CEO and sole Director of GRNF. Costello also was the Chairman of
Hempstract Inc. (“Hempstract”) until May 2021. Costello is the majority shareholder of GRN
Holding Corporation Washington (“GRN Holding (WA)”) and is the sole owner of GRN Funds,
LLC (“GRN Funds”). Costello is not registered with the Commission as a broker or an
investment adviser.
16. Ferraro, age 44, is a resident of Radford, VA. During the time period of the stock
promotion schemes described herein, Ferraro controlled a Twitter account under the handle

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
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“@computerbux,” which had nearly 10,000 followers as of December 2019. Ferraro is currently
employed as a “Business Transformation Consultant.”
OTHER RELEVANT ENTITIES
17. GRN Funds is a Washington limited liability company that is wholly owned by
Costello. GRN Funds purports to be a private equity and capital management company. It also
purports to provide banking services to marijuana-related businesses through a Costello-owned
entity formerly known as Pacific Banking Company and now known as Pacific Compliance
Corporation.
18. GRNF is a Nevada corporation that, until June 2022, had its principal executive
offices in Seattle, Washington. Its common stock is quoted publicly under the ticker symbol
“GRNF” on OTC Link, an exchange through which over-the-counter securities are traded. Until
August 19, 2019, GRNF was named Discovery Gold Corporation.
19. GRN Holding (WA) is a Washington corporation with its principal executive
offices in Seattle, Washington. GRN Holding (WA) is a private company founded by Costello
and of which Costello is its largest shareholder and CEO.
20. Hempstract is a Nevada corporation with its principal executive offices in
Warden, Washington. The company purports to develop and sell hemp-based products. Costello
was one of the initial founders of Hempstract, which became a publicly traded company after it
was acquired by Riverdale Oil and Gas Corporation (“RVDO”) in August 2020. Today, it is
quoted on OTC Link under the ticker symbol “HPST.”

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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FACTS
I. Costello Made False and Misleading Statements to the Investing Public, Including in
a Form 8-K and in a Press Release
21. On June 20, 2019, Costello, through GRN Funds, acquired 139 million shares—a
majority interest—of GRNF. At the time, the company was named Discovery Gold Corporation.
22. Costello purportedly planned to turn GRNF into a cannabis conglomerate by
merging companies in the cannabis industry into GRNF.
23. On July 1, 2019, GRNF filed a Form 8-K announcing Costello’s purchase of
GRNF shares and his appointment as President, CEO, and sole Director of GRNF.
24. The Form 8-K stated that Costello was a graduate of the University of Minnesota
and the Harvard Business School.
25. The Form 8-K also stated that Costello was the CEO of GRN Funds and described
GRN Funds as a “private equity and hedge fund.”
26. Contrary to these representations, Costello graduated from Winona State
University, and not the University of Minnesota.
27. Costello did not graduate from Harvard Business School. Costello has taken just
one class through Harvard University’s Division of Continuing Education.
28. GRN Funds has never been registered with the Commission as a hedge fund.
29. Costello knew that he was not a graduate of the University of Minnesota or
Harvard Business School.  Costello also knew that GRN Funds was not a hedge fund.
30. Costello signed GRNF’s July 1, 2019 Form 8-K containing these false
representations.

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SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
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31. The July 1, 2019 Form 8-K and accompanying press release were issued after
trading hours that day. On July 2, 2019, GRNF share prices increased from $0.0028 to $0.03—a
971 percent increase—on trading volume 400 times that of the prior day.
32. Around the time GRNF filed the July 1, 2019 Form 8-K, GRN Funds’s website
stated that it had $1.15 billion in assets under management. This statement was false.
33. On November 12, 2019, GRNF issued a press release, which Costello drafted,
announcing that it had signed “strategic non-binding letters of intent” to acquire ten financial
services and hemp and cannabis companies. The press release asserted that the intended
acquisitions would “result in the acquisition of a significant amount of assets” and cause GRNF
to cease being a shell company.
34. The press release described “Pacific Banking Corp.” as one of the entities with
which GRNF had signed a strategic non-binding letter of intent and stated that Pacific Banking
Corp. provided “specialized banking services” to its clients. Pacific Banking Corp. is majority-
owned by Costello.
35. The press release omitted that Pacific Banking Corp. is not registered as a state or
federal bank, or as a money services business.
36. Costello knew or recklessly disregarded that the statements in the press release
about Pacific Banking Corp. were false or misleading.
37. GRNF’s stock, which opened at $0.845 on November 12, 2019, the day of the
press release, reached an intraday high of $0.98—an approximately sixteen percent increase—
before closing at $0.89.

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
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 (212) 336-1100
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II. Costello Defrauded Two Advisory Clients and Engaged in Insider Trading
38. In July 2019, Costello became an investment adviser to a 65-year-old real estate
agent (“Advisory Client 1”) and her husband, a 68-year-old retiree (“Advisory Client 2”)
(together, “the Advisory Clients”).
39. As their investment adviser, Costello owed a fiduciary duty to act in the best
interest of the Advisory Clients at all times. Costello breached that duty in numerous ways.
A. Costello Made Materially False Statements to the Advisory Clients, Failed to
Act in the Best Interest of the Advisory Clients, and Failed to Make Full and
Fair Disclosure of Conflicts of Interest
40. Costello first met the Advisory Clients in January 2019. Costello made numerous
misrepresentations to them concerning his background, including that he is the youngest hedge
fund billionaire ever, that he has an MBA from Harvard University, that he is licensed to manage
money and investments, and that he had served in the military with the Special Forces.
41. These false credentials led the Advisory Clients to hire Costello to manage their
joint brokerage account (“Brokerage Account A”).
42. On July 14, 2019, the Advisory Clients opened Brokerage Account A and funded
Brokerage Account A with $4,000,600.
43. On July 20, 2019, the Advisory Clients signed a “Trading Authorization Form”
that designated Costello as their authorized agent. The Advisory Clients agreed to pay Costello
twenty percent of the profits in Brokerage Account A. Costello told the Advisory Clients that he
was waiving his typical two percent management fee as a “friends and family” discount.
44. The Advisory Clients provided Costello with discretion over, and full access to,
Brokerage Account A. Costello accessed Brokerage Account A electronically using Advisory
Client 1’s username and password. The Advisory Clients did not direct or execute any trades in
Brokerage Account A.

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45. Costello told Advisory Client 1 not to sign into Brokerage Account A while he
was signed into the account. He also instructed Advisory Client 1 that, if contacted by Brokerage
Firm A, she should falsely state that she placed all trades in the account and that she should ask
the brokerage firm not to restrict her account in response to any trading activity.
46. Although Costello had offered to develop a diverse financial portfolio for the
Advisory Clients, all of the investments in Brokerage Account A were in microcap companies
that Costello controlled or in which he personally invested.
47. For example, Costello purchased 555,000 common shares and 250,000 preferred
shares of Canal Capital Corporation (“Canal Capital”), for a total purchase price of over $80,000,
in Brokerage Account A. Canal Capital was a shell company that Costello was directing others to
promote on Twitter and whose stock Costello had purchased in his own account.
48. On November 1, 2019, the Commission suspended trading in Canal Capital’s
common and preferred stock. Prior to the announcement of the trading suspension, Costello had
sold over 489,000 shares of Canal Capital preferred stock in his own account for over $109,000
in profits. Costello, who did not disclose this trading to the Advisory Clients, did not sell any of
the Canal Capital stock that he had purchased in Brokerage Account A on their behalf.
B. Costello Engaged in Insider Trading in Brokerage Account A
49. Costello also used Brokerage Account A to purchase and sell GRNF stock while
he was the CEO and controlling shareholder of the company and in possession of material,
nonpublic information.
50. As GRNF’s CEO and controlling shareholder, Costello had a fiduciary duty and
other relationship of trust with GRNF and its shareholders that obligated him not to trade on
GRNF’s information for his personal benefit.

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51. In fact, Costello knew that he should not purchase any GRNF stock on the open
market because he was an insider with material, nonpublic information about the future plans of
the company and, given his access to this information, purchasing stock may violate the
securities laws.
52. Nevertheless, Costello purchased over 670,000 shares of GRNF stock in
Brokerage Account A in advance of a July 22, 2019, Form 8-K filing announcing that GRNF
would change its name from “Discovery Gold Corporation” to “GRN Holding Corporation” and
would request to change its trading symbol accordingly.
53. The information contained in the July 22, 2019 Form 8-K was material because it
signaled to investors that GRNF was taking actual steps toward becoming a purported cannabis
conglomerate. GRNF’s share price increased 137 percent on the day the Form 8-K was issued.
54. The information contained in the July 22, 2019 Form 8-K was nonpublic because,
prior to the filing, it was not broadly disseminated to the investing public.
55. Between July 22 and July 25, 2019, Costello sold the GRNF shares he had
acquired in Brokerage Account A for approximately $150,000 in profits. Costello included these
profits in an invoice that he sent to the Advisory Clients, who paid him twenty percent of the
realized profits on Costello’s trading of GRNF in Brokerage Account A.
56. Based on their agreement with Costello, the Advisory Clients made two payments
to Costello totaling $37,916.05, including for twenty percent of the profits from the purchase and
sale of GRNF stock.
57. In October 2019, Brokerage Firm A informed the Advisory Clients that it had
decided to end its business relationship with them.

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SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
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58. At Costello’s instruction, the Advisory Clients thereafter opened Brokerage
Account B at a different brokerage firm and transferred approximately $1.27 million from
Brokerage Account A to Brokerage Account B.
59. Like with Brokerage Account A, the Advisory Clients gave Costello full authority
over the new brokerage account at Brokerage Firm B, in which Costello continued to trade
microcap companies on the Advisory Client’s behalf until approximately February 2020.
60. At the end of October 2019, the securities remaining in Brokerage Account A
were valued at approximately $2.9 million. By the end of April 2020, the month before the
Advisory Clients began to liquidate the stocks Costello had purchased in Brokerage Account A,
the value of those securities had declined by approximately 65 percent.
61. At the end of February 2020, the securities in Brokerage Account B were valued
at approximately $299,700. As of the end of June 2022, the value of those securities had declined
by approximately 97 percent.
C. Costello Defrauded the Advisory Clients in Connection with the Sale of
GRNF Stock
62. Around the time that the Advisory Clients hired Costello to manage Brokerage
Account A, the Advisory Clients also agreed to purchase nine million shares of GRNF stock
directly from Costello for $1.8 million (i.e., $0.20 per share).
63. This $1.8 million purchase price represented a markup by Costello of over 9,000
percent from the price of $0.002 per share that Costello had paid for those same shares of GRNF
stock the previous month.
64. Costello failed to fully and fairly disclose to the Advisory Clients that he had
acquired his shares of GRNF stock for $0.002 per share and that the $1.8 million purchase price
reflected a markup of over 9,000 percent.

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65. On July 23, 2019, the Advisory Clients paid for the shares by a cashier’s check
written to GRN Funds.
66. In approximately April 2020, after numerous requests, Costello sent to the
Advisory Clients what purported to be share certificates reflecting their ownership of 9.5 million
shares of GRNF stock.
67. In approximately October 2020, Costello directed GRNF to issue nine million
shares of GRNF stock to the Advisory Clients. Although the share purchase agreement for those
shares was between the Advisory Clients and GRN Funds, Costello directed that new shares be
issued by GRNF rather than transferring the shares he owned through GRN Funds and
purportedly sold to the Advisory Clients.
68. Despite having instructed GRNF to issue new shares to the Advisory Clients
rather than transferring GRN Funds’s shares to the Advisory Clients, Costello never transferred
the $1.8 million the Advisory Clients paid for the stock to GRNF.
III. Costello Obtained Approximately $700,000 from the Sale of GRN Holding (WA)
Stock Based on Misrepresentations
69. From at least July to November 2019, Costello solicited the Advisory Clients and
11 other investors to invest in a “family and friends” share offering for GRN Holding (WA).
70. Although GRN Holding (WA) shares the “GRN Holding Corporation” name with
the publicly traded GRNF, it is a separate, private company incorporated by Costello in a
different state and initially owned solely by Costello.
71. Costello misled investors in GRN Holding (WA) to believe, however, that they
were receiving shares of the publicly traded GRNF entity.
72. For example, Costello sent the Advisory Clients the subscription agreement for
their investment in GRN Holding (WA) in the same email in which he sent the share purchase

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agreement for the nine million shares of GRNF. The subject line of the email was simply
“Subscription Agreement and Common Shares,” and in his email Costello did not differentiate
between the two entities.
73. Another investor (“Investor 1”) expressed to Costello that he and his father
(“Investor 2”) were interested in investing in GRNF after seeing the performance of the publicly
traded GRNF stock. Costello offered Investor 1 and Investor 2 a “friends and family” deal if they
each invested $25,000. When Costello sent Investor 1 and Investor 2 the subscription agreement
for their investments, however, Costello did not differentiate between GRNF and the entity in
which Investor 1 and Investor 2 would actually be investing.
74. Like the Advisory Clients, other investors in GRN Holding (WA) also believed
that Costello was a billionaire with a Harvard MBA, a military veteran, and experienced in the
financial industry. These investors also believed that Costello owned legitimate, revenue-
generating businesses that could potentially be merged into GRNF.
75. For example, Costello emailed Investor 1 and Investor 2 information about his
purported “banking program” at Pacific Banking Corp. The materials described Pacific Banking
Corp. as providing “safe, secure & compliant cannabis banking.” As alleged above, Pacific
Banking Corp. was not registered to conduct business as a bank or money services business.
76. In total, Costello obtained approximately $700,000 in investments for GRN
Holding (WA) from 13 investors, including $250,000 from the Advisory Clients and $25,000
from each of Investor 1 and Investor 2.

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IV. Costello Obtained Approximately $200,000 from the Sale of Hempstract Stock
Based on Misrepresentations and then Misappropriated a Portion of the Funds
77. Beginning in at least January 2020, Costello began purchasing shares of RVDO
on the open market. Costello planned to merge Hempstract, a private company that he co-owned,
into RVDO.
78. Costello made misrepresentations to secure investments for Hempstract.
79. For example, in approximately March 2020, Costello made a presentation to
potential investors, pitching an opportunity to purchase shares of Hempstract before it became a
public company. During that meeting, Costello falsely stated that he had sixteen years of
investment banking experience on Wall Street, that he was a banker in the cannabis industry who
managed money for over 400 clients, and that he had over a billion dollars of equity in his own
fund. Each of those representations was false.
80. Costello also told potential investors that any shares they purchased would be
restricted from trading for six months, at which point they could sell their shares through a
brokerage account. However, because RVDO was a shell company that was not an SEC-
reporting company, any shares of RVDO would be required to be held for one year.
81. In total, between March and August 2020, Costello obtained approximately
$200,000 in investments for Hempstract from 19 investors. Of that amount, checks for
approximately $50,000 from four investors were written to, and deposited in, a bank account for
a separate entity controlled by Costello. Costello never transferred the funds he received for the
four investors’ investments in Hempstract.
V. Costello and Ferraro Engaged in Stock Promotion Schemes
82. Costello and Ferraro met in mid-2019. Ferraro was a GRNF investor who had
posted about the company on various investor message boards.

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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83. Ferraro controlled a Twitter account with the handle “@computerbux” that at one
point had over 10,000 followers. Ferraro posted at least 7,900 tweets in 2019 and at least 5,000
tweets from January through June 2020. Nearly 90 percent of these tweets referenced a specific
stock or stocks.
84. Costello and Ferraro used Ferraro’s Twitter account to perpetrate at least five
stock promotion schemes (each a “Stock Promotion Scheme” and collectively, the “Stock
Promotion Schemes”). In each Stock Promotion Scheme, Ferraro recommended a penny stock
that he and/or Costello owned to Ferraro’s Twitter followers and the public. As he wrote in a
January 2020 email to Costello summarizing their schemes, Ferraro understood that his
“announce[ments]” on Twitter would cause the stock to “run[ ] on hype,” i.e., cause the stock
price to increase. In his promotional tweets, Ferraro did not disclose that he and/or Costello
intended to sell their own holdings of those stocks into the inflated market that Ferraro’s tweets
helped create. Ferraro also did not disclose that Costello had agreed to pay Ferraro a portion of
Costello’s profits from certain of the Stock Promotion Schemes.
A. The Canal Capital Corporation (“Canal Capital”) Stock Promotion Scheme
85. On October 7, 2019, Costello learned from an investor in Canal Capital, a defunct
company, that former executives at Canal Capital had agreed to sell their shares of Canal Capital
to the investor. Without that investor’s knowledge, on that day Costello began buying shares of
Canal Capital on the open market, and by October 10, 2019, Costello had accumulated over one
million shares of Canal Capital common stock (“COWP”) and over 740,000 shares of Canal
Capital preferred stock (“COWPP”).
86. Costello messaged Ferraro: “COWP and COWPP attack it hard [I] have 70% of
float already.” Float refers to the total number of shares of a stock that are available for public
investors to buy and sell.

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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87. On October 10, 2019, Ferraro began to purchase shares of Canal Capital stock in
his brokerage account.
88. On October 10, 2019, Ferraro began to promote Canal Capital on Twitter, and
would ultimately tweet about Canal Capital at least 270 times over the next three weeks.
Ferraro’s promotional tweets included (i) October 10, 2019 posts that “[Costello] owns 70% and
believes it will be a Michigan Avenue dispensary” and that he was “betting over 1000% gains”
for COWPP, (ii) October 17, 2019 tweets that “new highs [are] coming” for COWP and COWPP
and that “[t]his is your shot ... time is of the essence,” and (iii) an October 22, 2019 tweet that
COWPP is “[l]ooking like it’s gearing for a 700% - 1000% run.”
89. At no point did Ferraro disclose that he or Costello were selling Canal Capital
stocks during this time period.
90. Ferraro’s tweets coincided with significant increases in the share price and trading
volume in COWP and COWPP, and the Commission ultimately suspended trading in Canal
Capital securities on November 1, 2019.
91. Prior to the institution of the trading suspension, Costello sold over 489,000
shares of COWPP for over $109,000 in profits. Ferraro profited approximately $41,000 from his
own trading.
B. The Foothills Exploration, Inc. (“FTXP”) Stock Promotion Scheme
92. On December 9, 2019, Costello acquired over 7.6 million shares of FTXP. That
day, the stock closed at $0.007 per share.
93. That evening, Costello messaged Ferraro about Ferraro promoting FTXP, and
Costello agreed to share 30 percent of his profits with Ferraro.
94. Costello instructed Ferraro to wait until 10 a.m. the next day because he planned
to purchase additional shares.

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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95. On the evening of December 9, Ferraro teased the following in a tweet: “I have a
MASSIVE MASSIVE MASSIVE stock to announce with a PERFECT chart. Stay tuned.
Announcement tomorrow morning!!!!!!”
96. At 9:23 a.m. on December 10, Ferraro asked Costello what “central theme” could
be used to promote FTXP. Costello replied at 9:41 a.m., writing only: “Large reserves.”
97. In the meantime, at 9:32 a.m., Ferraro tweeted that “[t]he new stock I’m calling at
10 am has a 90% [chance] of being a 60 bagger within 30 days. That’s 6,000% gain friends!”
98. At 9:44 a.m., after confirming with Costello that he should start tweeting, Ferraro
tweeted: “The huge 60 bagger call is $FTXP!!!!!!!!!!!!!!!!!!!!!!! The word on the street is they hit
the motherlode!!!!!!! Huge reserve found and they got it all! And the actual public float around
2M shares!!!”
99. Ferraro would go on to post at least 90 promotional tweets about FTXP on
December 10—including, for example, “$FTXP A hedge I know owns 5M of this” and “$FTXP
On the verge of a MAJOR MAJOR MAJOR breakout!!!!!!!!!!”—and over 100 additional tweets
over the next two weeks. FTXP’s stock price closed at $0.0273 on December 10, a 290 percent
increase over the prior day’s close, and reached an intraday high of $0.0465 on December 11.
100. At no point did Costello or Ferraro disclose that Costello was selling FTXP stocks
during this time period or that Ferraro would receive a share of Costello’s profits.
101. Costello, who began selling his shares of FTXP shortly after Ferraro began
tweeting about FTXP, sold his entire position by December 13, 2019 for profits of approximately
$113,000. Costello shared over $23,000 of those profits with Ferraro.

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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C. The REMSleep Holdings, Inc. (“RMSL”) Stock Promotion Scheme
102. On December 13, 2019, Costello acquired over 4.5 million shares of RMSL, and
its stock closed at $0.02 that day. Costello purchased an additional 121,000 shares of RMSL on
the morning of December 16.
103. Also on the morning of December 16, Costello messaged Ferraro to share his
position: “RMSL. In for 4 mil total.” Ferraro replied that he would “start researching for noon so
I have a story to tell.”
104. At 10:57 a.m. on December 16, Ferraro tweeted: “T minus 1 hour and 4
minutes....”
105. At noon, referencing a predicted 1,000 percent gain, Ferraro tweeted: “And the
huge 10 bagger is....... $RMSL !!!!!!!!!!!!!!!!!!!!!!! $RMSL has entered the VERY
LUCRATIVE Sleep apnea medical device market!!! They put out PR’s regularly. They should
have a market cap over $10M!!! The chart is screaming for a massive run up!!!!”
106. Ferraro ultimately posted at least 100 tweets on December 16 and over 200
additional tweets over the next two weeks promoting RMSL. RMSL’s stock price reached an
intraday high of $0.0368 on December 16 and closed at $0.031 that day, a 55 percent increase
over the prior day’s close.
107. At no point did Costello or Ferraro disclose that Costello was selling RMSL
stocks during this time period or that Ferraro would receive a share of Costello’s profits.
108. Costello began selling his shares of RMSL shortly after Ferraro began tweeting
about RMSL on December 16, and sold his entire position by December 19 for profits of
approximately $64,000. Costello shared $9,100 of those profits with Ferraro.

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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D. The Clancy Systems International (“CLSI”) Stock Promotion Scheme
109. From October 3 through October 7, 2019, Costello accumulated over 600,000
shares of CLSI.
110. On October 7, Ferraro began promoting CLSI, tweeting that it was “Looking hot”
and that it “looks prime.” On October 8, he tweeted a predicted CLSI share price increase “on
news.”
111. Also on October 7, Costello began selling his CLSI shares. He sold his entire
CLSI position on October 7 and October 8, profiting approximately $13,000.
112. Costello began buying CLSI shares again in January 2020, and by the end of the
month he held over 4.2 million shares. On February 5, 2020, Costello purchased an additional
75,000 shares of CLSI.
113. On Friday, February 7, Costello messaged Ferraro: “Took a large position in
[CLSI] 2 mil today if you want to run it. ... Buying more of [CLSI] on monday.” Three minutes
later, Ferraro responded: “I’ll start on it now.” Shortly thereafter, Ferraro tweeted that CLSI
“looks like a good bet big time,” and later that day, Ferraro tweeted that CLSI “might be one of
the biggest of the year.”
114. Ferraro’s promotional tweeting about CLSI continued in the ensuing days,
including tweets on February 13 that his followers should “TRUST THE BUX” and “LOAD
HEAVY” and on February 18 that CLSI “is going to be a 10 bagger :).”
115. In total, from February 10 through February 19, Ferraro posted over 180 tweets
promoting CLSI. At no point did Costello or Ferraro disclose that Costello was selling CLSI
stocks during this time period.
116. Costello sold all of his CLSI shares from February 10 through February 19,
generating profits of approximately $29,000.

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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E. The RVDO and HPST Stock Promotion Scheme
117. In February and March 2020, Costello accumulated nearly 2 million shares of
RVDO.
118. On March 26, 2020, Ferraro wrote to Costello: “RVDO ?” Costello responded:
“Accumulate don[’t] post.”
119. On March 26, Ferraro also messaged another investor: “Let’s keep the RVDO
tweets to zero till filings. . . .  It doesn’t have filings for six years and I don’t want to give the
SEC a reason to suspend trading until the financials are filed and it gets current.”
120. On April 23, 2020, RVDO posted quarterly and annual reports for periods in 2016
through 2019 on the OTC Link website.
121. On April 28, RVDO announced that it had signed a strategic non-binding letter of
intent with Hempstract.
122. Also on April 28, Ferraro began a months-long promotional campaign of RVDO
on Twitter. His tweets included, for example, a post on April 29 that “[RVDO] is one you’ll want
to accumulate for sure.”
123. On May 20, 2020, Ferraro tweeted, regarding RVDO: “BIG. THINGS.
HAPPENING.” On May 21, Ferraro tweeted that RVDO bidders “better move those bids up!”
because “NEWS IS COMING” and “Ain’t nobody selling.”
124. That same day, May 21, Costello began selling his RVDO shares. Through
RVDO sales he made from May 21 through June 8, Costello profited approximately $314,000.
During that period, Ferraro promoted RVDO in over 250 tweets. In total, from April through
July 2020, Ferraro posted a total of over 1,300 tweets promoting RVDO.
125. Ferraro continued to post about RVDO on his Twitter account throughout the
remainder of 2020 and into 2021, including after RVDO changed its ticker symbol to HPST.

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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126. In early January 2021, Ferraro’s tweets about HPST included, on January 4,
“$HPST Time for the hell yes” and, on January 5, “$HPST Float lock status is looking
reallllllllly close” and “$HPST Accumulation increasing. Shares getting scarce IMO.” On
January 5, Ferraro also shared a HPST press release announcing that the company had
purportedly completed the extraction process on over 36,000 pounds of raw hemp, tweeting,
“$HPST That’s about a $10M contract for the first one.......WOW!!!!!!!” and “$HPST I’m
betting we see a supplemental PR with numbers :).”
127. On January 6, 2021, Costello sold over 70,000 shares of HPST, generating profits
of approximately $41,000.
128. At no point did Costello or Ferraro disclose that Costello was selling RVDO or
HPST stocks during these time periods.
VI.  Ferraro Separately Engaged in Stock Promotion Schemes
129. Ferraro also engaged in his own Stock Promotion Schemes in July 2019,
December 2019, and January 2020, generating profits of approximately $68,000.
A. The Powerdyne International Inc. (“PWDY”) Stock Promotion Scheme
130. From July 12 through July 24, 2019, Ferraro purchased over 25 million shares of
PWDY, a stock he had lightly traded and tweeted about during the prior month.
131. From July 25 through July 29, Ferraro posted at least 70 promotional tweets about
PWDY. These tweets included “$PWDY Is about to explode” on July 25, “$PWDY ... to triple
in value in the next 5 trading days IMO,” the following day, and, on July 29, “$PWDY is about
to breakout!”
132. At no point did Ferraro disclose that he was selling PWDY stocks during this time
period.

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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133. Ferraro sold his entire PWDY from July 25 through July 29. His profits from this
trading activity were approximately $47,000.
B. The South Beach Spirits (“SBES”) Stock Promotion Schemes
134. From December 3 to December 5, 2019, Ferraro purchased 4.7 million shares of
South Beach Spirits (“SBES”) at prices ranging from $0.0038 to $0.0047 per share. During this
time, he tweeted about a potential “breakout” for the stock.
135. On December 6, Ferraro tweeted: “$SBES My wall street friends say that there is
a deal in the works that will bring this well over $2. Very interesting indeed.” On that day he
again touted a potential “breakout” for SBES, and tweeted that “I think $.08 is a good initial
target that will be hit easily.”
136. By December 9, Ferraro had sold all of his SBES shares, primarily through the
sale of 4.5 million shares on December 9 at share prices ranging from $0.0075 to $0.0081. In
total, from December 3 through December 9, Ferraro posted a total of 39 promotional tweets
about SBES. These included a tweet on the evening of December 8, shortly before he sold the
bulk of his position, that “I saw there is a second $10B opportunity for this year in $SBES.”
137. At no point did Ferraro disclose that he was selling SBES stocks during this time
period.
138. Ferraro profited approximately $16,000 from his trading in SBES from December
3 through December 9.
139. From January 17 to January 22, 2020, Ferraro again acquired a position in SBES,
this time purchasing 2.5 million shares at share prices ranging from $0.0091 to $0.0102.
140. During this time, Ferraro tweeted that “filings [are] expected” for SBES and a
“breakout” was coming.

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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141. Ferraro then sold all of his shares on January 24, 2020, while posting at least 35
promotional tweets about SBES. These tweets included a prediction that “$SBES will announce
something” and “news and filings will take it [to] dollar land,” and urging his followers to “[g]et
in BEFORE the filings.”
142. At no point did Ferraro disclose that he was selling SBES stocks during this time
period.
143. Ferraro’s January 24 sales of SBES were made at share prices ranging from
$0.0100 to $0.0132, for total profits of approximately $5,000.
FIRST CLAIM FOR RELIEF
Violations of Securities Act Section 17(a)
(Both Defendants)

144. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 143.
145. Defendants, directly or indirectly, singly or in concert, in the offer or sale of
securities and by the use of the means or instruments of transportation or communication in
interstate commerce or the mails, have (1) knowingly or recklessly employed one or more
devices, schemes or artifices to defraud, (2) knowingly, recklessly, or negligently obtained
money or property by means of one or more untrue statements of a material fact or omissions of
a material fact necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading, and/or (3) knowingly, recklessly, or negligently
engaged in one or more transactions, practices, or courses of business which operated or would
operate as a fraud or deceit upon the purchaser.
146. By reason of the foregoing, Defendants, directly or indirectly, singly or in concert,
have violated and, unless enjoined, will again violate Securities Act Section 17(a) [15 U.S.C.
§ 77q(a)].

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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SECOND CLAIM FOR RELIEF
Violations of Exchange Act Section 10(b) and Rule 10b-5 Thereunder
(Both Defendants)

147. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 143.
148. Defendants, directly or indirectly, singly or in concert, in connection with the
purchase or sale of securities and by the use of means or instrumentalities of interstate
commerce, or the mails, or the facilities of a national securities exchange, knowingly or
recklessly have: (1) employed one or more devices, schemes, or artifices to defraud, (2) made
one or more untrue statements of a material fact or omitted to state one or more material facts
necessary in order to make the statements made, in light of the circumstances under which they
were made, not misleading, and/or (3) engaged in one or more acts, practices, or courses of
business which operated or would operate as a fraud or deceit upon other persons.
149. By reason of the foregoing, Defendants, directly or indirectly, singly or in concert,
have violated and, unless enjoined, will again violate Exchange Act Section 10(b) [15 U.S.C.
§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
THIRD CLAIM FOR RELIEF
Violations of Advisers Act Sections 206(1) and (2)
(Costello)
150. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 143.
151. At all relevant times, Defendant Costello was an investment adviser under
Advisers Act Section 202(11) [15 U.S.C. § 80b-2(11)].
152. Defendant Costello, by use of the mails or any means or instrumentality of
interstate commerce, directly or indirectly has: (1) knowingly or recklessly employed one or
more devices, schemes, or artifices to defraud any client or prospective client, and/or (2)

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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knowingly, recklessly, or negligently engaged in one or more transactions, practices, and courses
of business which operated or would operate as a fraud or deceit upon any client or prospective
client.
153. By reason of the foregoing, Defendant Costello, directly or indirectly, singly or in
concert, has violated and, unless enjoined, will again violate Advisers Act Sections 206(1) and
(2) [15 U.S.C. §§ 80b-6(1) and 80b-6(2)].
PRAYER FOR RELIEF
154. WHEREFORE, the Commission respectfully requests that the Court enter a Final
Judgment:
I.
155. Permanently enjoining Costello and his agents, servants, employees, and
attorneys, and all persons in active concert or participation with any of them, from violating,
directly or indirectly, Securities Act Section 17(a) [15 U.S.C. § 77q(a)], Exchange Act Section
10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], and Advisers Act
Sections 206(1) and 206(2) [15 U.S.C. §§ 80b-6(1) and 80b-6(2)];
II.
156. Permanently enjoining Ferraro and his agents, servants, employees, and attorneys,
and all persons in active concert or participation with any of them, from violating, directly or
indirectly, Securities Act Section 17(a) [15 U.S.C. § 77q(a)] and Exchange Act Section 10(b) [15
U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5];

III.
157. Ordering Defendants to disgorge all ill-gotten gains they received directly or
indirectly, with pre-judgment interest thereon, as a result of the alleged violations pursuant to

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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Exchange Act Sections 21(d)(3) [15 U.S.C. § 78u(d)(3)], 21(d)(5) [15 U.S.C. § 78u(d)(5)], and
21(d)(7) [15 U.S.C. § 78u(d)(7)];
IV.
158. Ordering Defendants to pay civil monetary penalties under Securities Act Section
20(d) [15 U.S.C. § 77t(d)], Exchange Act Sections 21(d)(3) [15 U.S.C. § 78u(d)(3)] and 21A [15
U.S.C. §§ 78u-1(a)(1)-(2)], and Advisers Act Section 209(e) [15 U.S.C.§ 80b-9(e)];
V.
159. Permanently prohibiting Costello from serving as an officer or director of any
company that has a class of securities registered under Exchange Act Section 12 [15 U.S.C.
§ 78l] or that is required to file reports under Exchange Act Section 15(d) [15 U.S.C. § 78o(d)],
pursuant to Securities Act Section 20(e) [15 U.S.C. § 77t(e)] and Exchange Act Section 21(d)(2)
[15 U.S.C. § 78u(d)(2)];
VI.
160. Permanently prohibiting Defendants from participating in any offering of a penny
stock, including engaging in activities with a broker, dealer, or issuer for purposes of issuing,
trading, or inducing or attempting to induce the purchase or sale of any penny stock, under
Securities Act Section 20(g) [15 U.S.C. § 77t(g)] and Exchange Act Section 21(d)(6) [15 U.S.C.
§ 78u(d)(6)]; and

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COMPLAINT Securities and Exchange Commission
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
 (212) 336-1100
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VII.
161. Granting any other and further relief this Court may deem just and proper.

Dated: September 29, 2022

Respectfully submitted,

 s/ Pascale Guerrier
 Pascale Guerrier
 Conditionally Admitted Pursuant to LCR
                                                                                          83.1(c)(2)
                                                                                    Samuel                                                                                    Kalar
 Conditionally Admitted Pursuant to LCR
                                                                                          83.1(c)(2)
                                                                                    Tiantong                                                                                    Wen
 Conditionally Admitted Pursuant to LCR
                                                                                          83.1(c)(2)
Securities and Exchange Commission
100 Pearl Street, Suite 20-100
 New York, NY 10004-2616
(212) 336-1100
Email: [email protected]

Attorneys for Plaintiff Securities and
Exchange Commission

COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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UNITED STATES DISTRICT COURT 

WESTERN DISTRICT OF WASHINGTON 

SEATTLE DIVISION 

 

SECURITIES AND EXCHANGE 
COMMISSION, 
 

 Plaintiff, 
 

 v. 
 

JUSTIN COSTELLO and 
DAVID FERRARO 
 

 Defendants. 

CASE NO.  
 
 
COMPLAINT 
JURY DEMAND 

 
 

Plaintiff Securities and Exchange Commission (the “SEC” or the “Commission”), for its 

complaint against Defendants Justin Costello (“Costello”) and David Ferraro (“Ferraro”) alleges 

as follows:

Case 2:22-cv-01388   Document 1   Filed 09/29/22   Page 1 of 28



 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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SUMMARY 

1. This action involves Costello’s numerous schemes to defraud investors, all of 

which violated the antifraud provisions of the federal securities laws. Costello, who claimed to 

be building a conglomerate in the cannabis industry, falsely portrayed himself to the public as a 

billionaire with a Harvard MBA, a military veteran, and a hedge fund manager with years of 

experience on Wall Street. Between at least July 2019 and August 2020, Costello used these and 

other fictitious credentials to gain investors’ trust and to defraud them out of millions of dollars. 

2. First, Costello disseminated materially false or misleading information about his 

educational and professional credentials to the investing public, including in a Commission filing 

for GRN Holding Corporation Nevada (“GRNF”), a publicly traded microcap company of which 

Costello was CEO. In a press release for GRNF, Costello also disseminated materially false or 

misleading information about a purported banking entity that Costello owned and that GRNF 

would allegedly acquire. 

3. Second, after using his fabricated accomplishments to become an investment 

adviser to a married couple, Costello sold the couple $1.8 million in stock at an over 9,000 

percent markup without adequately disclosing the markup to them. Costello further used the 

same advisory clients’ $4 million brokerage account to trade securities of companies in which he 

had an undisclosed financial interest and to conduct insider trading. 

4. Third, Costello obtained approximately $700,000 in investments from 13 

investors for a closely-held company that shared a name with GRNF but that was in fact a 

separate, private entity owned and controlled by Costello.  As a result of Costello’s materially 

false or misleading statements, investors were led to believe that they were buying shares of 

GRNF, and not shares of the private entity.  

Case 2:22-cv-01388   Document 1   Filed 09/29/22   Page 2 of 28



 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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5. Fourth, Costello obtained approximately $200,000 in investments from 19 

investors for a private company that Costello purportedly planned to turn into a publicly traded 

cannabis-related company. Certain of the investors attended a presentation during which Costello 

again emphasized his false professional credentials, including his purported experience as an 

investment banker in the cannabis industry. In addition, for at least $50,000 of the investments in 

the private company, Costello misappropriated the funds by depositing them in an account for 

yet a different company that Costello controlled. 

6. Fifth, from at least October 2019 through January 2021 Costello and Ferraro 

engaged in stock promotion schemes in which Ferraro recommended to his Twitter followers and 

the public at least five microcap stocks that Costello owned. Ferraro failed to disclose that he and 

Costello intended to sell shares of those stocks as the price of those stocks rose, or that Costello 

would pay Ferraro a portion of his profits from those sales. Costello profited approximately 

$683,000 from these schemes, of which he shared approximately $32,000 with Ferraro. Ferraro 

profited approximately $41,000 from his own trading in these schemes.  

7. Additionally, in July 2019, December 2019, and January 2020, Ferraro separately 

conducted his own stock promotion schemes with respect to two additional microcap stocks, 

generating profits of approximately $68,000. 

VIOLATIONS 

8. By engaging in the conduct set forth in this Complaint, Defendants violated 

Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)] and Section 

10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 

10b-5 thereunder [17 C.F.R. § 240.10-b5]. Costello further violated Sections 206(1) and 206(2) 

of the Investment Advisers Act of 1940 (“Advisers Act”) [15 U.S.C. §§ 80b-6(1) and 80b-6(2)]. 

Case 2:22-cv-01388   Document 1   Filed 09/29/22   Page 3 of 28



 

4 
COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
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9. Unless the Defendants are permanently restrained and enjoined, they will 

continue to engage in the acts, practices, and courses of business set forth in this Complaint and 

in acts, practices, and courses of business of similar type and object. 

NATURE OF THE PROCEEDING AND RELIEF SOUGHT 

10. The Commission brings this action pursuant to the authority conferred upon it by 

Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)], Section 21(d) of the Exchange Act [15 

U.S.C. § 78u(d)], and Section 209(d) of the Advisers Act [15 U.S.C. § 80b-9(d)]. 

11. The Commission seeks a final judgment: 1) permanently enjoining the Defendants 

from ongoing or future violations of the federal securities laws and rules this Complaint alleges 

they have violated; 2) ordering the Defendants to disgorge all ill-gotten gains they received as a 

result of the violations alleged herein and to pay prejudgment interest thereon pursuant to 

Sections 21(d)(3) [15 U.S.C. § 78u(d)(3)], 21(d)(5) [15 U.S.C. § 78u(d)(5)], and 21(d)(7) [15 

U.S.C. § 78u(d)(7)] of the Exchange Act; 3) ordering the Defendants to pay civil money 

penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)], Section 21(d)(3) of 

the Exchange Act [15 U.S.C. § 78u(d)(3)], and, as to Costello, also Section 21A of the Exchange 

Act [15 U.S.C. §§ 78u-1(a)(1)-(2)] and Section 209(e) of the Advisers Act [15 U.S.C.§ 80b-

9(e)]; 4) prohibiting the Defendants from participating in any offering of a penny stock, pursuant 

to Securities Act Section 20(g) [15 U.S.C. § 77t(g)] and Exchange Act Section 21(d)(6) [15 

U.S.C. § 78u(d)(6)]; 5) prohibiting Costello from serving as an officer or director of any public 

company pursuant to Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)] and Section 

21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)]; and 6) ordering any further relief that the 

Court may deem just and proper. 

 
 
 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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JURISDICTION AND VENUE 

12. This Court has jurisdiction over this action pursuant to Sections 22(a) of the 

Securities Act [15 U.S.C. § 77v(a)], Section 27 of the Exchange Act [15 U.S.C. § 78aa], and 

Section 214 of the Advisers Act [15 U.S.C. § 80b-14].  

13. The Defendants, directly or indirectly, have made use of the means or 

instrumentalities of interstate commerce or of the mails in connection with the transactions, acts, 

practices, and courses of business alleged herein.   

14. Venue lies in this District under Section 22(a) of the Securities Act [15 U.S.C. 

§ 77v(a)], Section 27 of the Exchange Act [15 U.S.C. § 78aa], and Section 214 of the Advisers 

Act [15 U.S.C. § 80b-14]. Certain of the acts, practices, transactions, and courses of business 

alleged in this Complaint occurred within this District. Among other things, Costello made 

certain of the false statements described herein, and placed certain of the trades described herein, 

while physically present in this District. Costello also made certain transfers to Ferraro from 

bank accounts owned by entities located in this District and engaged in stock promotion schemes 

with Ferraro while within this District. 

DEFENDANTS 

15. Costello, age 42, currently resides in La Jolla, California. Until August 2022, 

Costello was the CEO and sole Director of GRNF. Costello also was the Chairman of 

Hempstract Inc. (“Hempstract”) until May 2021. Costello is the majority shareholder of GRN 

Holding Corporation Washington (“GRN Holding (WA)”) and is the sole owner of GRN Funds, 

LLC (“GRN Funds”). Costello is not registered with the Commission as a broker or an 

investment adviser. 

16. Ferraro, age 44, is a resident of Radford, VA. During the time period of the stock 

promotion schemes described herein, Ferraro controlled a Twitter account under the handle 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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“@computerbux,” which had nearly 10,000 followers as of December 2019. Ferraro is currently 

employed as a “Business Transformation Consultant.”   

OTHER RELEVANT ENTITIES 

17. GRN Funds is a Washington limited liability company that is wholly owned by 

Costello. GRN Funds purports to be a private equity and capital management company. It also 

purports to provide banking services to marijuana-related businesses through a Costello-owned 

entity formerly known as Pacific Banking Company and now known as Pacific Compliance 

Corporation. 

18. GRNF is a Nevada corporation that, until June 2022, had its principal executive 

offices in Seattle, Washington. Its common stock is quoted publicly under the ticker symbol 

“GRNF” on OTC Link, an exchange through which over-the-counter securities are traded. Until 

August 19, 2019, GRNF was named Discovery Gold Corporation. 

19. GRN Holding (WA) is a Washington corporation with its principal executive 

offices in Seattle, Washington. GRN Holding (WA) is a private company founded by Costello 

and of which Costello is its largest shareholder and CEO.  

20. Hempstract is a Nevada corporation with its principal executive offices in 

Warden, Washington. The company purports to develop and sell hemp-based products. Costello 

was one of the initial founders of Hempstract, which became a publicly traded company after it 

was acquired by Riverdale Oil and Gas Corporation (“RVDO”) in August 2020. Today, it is 

quoted on OTC Link under the ticker symbol “HPST.” 

 
 
 
 
 
 
 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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FACTS 

I. Costello Made False and Misleading Statements to the Investing Public, Including in 
a Form 8-K and in a Press Release 

21. On June 20, 2019, Costello, through GRN Funds, acquired 139 million shares—a 

majority interest—of GRNF. At the time, the company was named Discovery Gold Corporation.  

22. Costello purportedly planned to turn GRNF into a cannabis conglomerate by 

merging companies in the cannabis industry into GRNF.  

23. On July 1, 2019, GRNF filed a Form 8-K announcing Costello’s purchase of 

GRNF shares and his appointment as President, CEO, and sole Director of GRNF.  

24. The Form 8-K stated that Costello was a graduate of the University of Minnesota 

and the Harvard Business School. 

25. The Form 8-K also stated that Costello was the CEO of GRN Funds and described 

GRN Funds as a “private equity and hedge fund.” 

26. Contrary to these representations, Costello graduated from Winona State 

University, and not the University of Minnesota. 

27. Costello did not graduate from Harvard Business School. Costello has taken just 

one class through Harvard University’s Division of Continuing Education.  

28. GRN Funds has never been registered with the Commission as a hedge fund. 

29. Costello knew that he was not a graduate of the University of Minnesota or 

Harvard Business School.  Costello also knew that GRN Funds was not a hedge fund. 

30. Costello signed GRNF’s July 1, 2019 Form 8-K containing these false 

representations. 

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SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
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31. The July 1, 2019 Form 8-K and accompanying press release were issued after 

trading hours that day. On July 2, 2019, GRNF share prices increased from $0.0028 to $0.03—a 

971 percent increase—on trading volume 400 times that of the prior day. 

32. Around the time GRNF filed the July 1, 2019 Form 8-K, GRN Funds’s website 

stated that it had $1.15 billion in assets under management. This statement was false. 

33. On November 12, 2019, GRNF issued a press release, which Costello drafted, 

announcing that it had signed “strategic non-binding letters of intent” to acquire ten financial 

services and hemp and cannabis companies. The press release asserted that the intended 

acquisitions would “result in the acquisition of a significant amount of assets” and cause GRNF 

to cease being a shell company.  

34. The press release described “Pacific Banking Corp.” as one of the entities with 

which GRNF had signed a strategic non-binding letter of intent and stated that Pacific Banking 

Corp. provided “specialized banking services” to its clients. Pacific Banking Corp. is majority-

owned by Costello.  

35. The press release omitted that Pacific Banking Corp. is not registered as a state or 

federal bank, or as a money services business. 

36. Costello knew or recklessly disregarded that the statements in the press release 

about Pacific Banking Corp. were false or misleading. 

37. GRNF’s stock, which opened at $0.845 on November 12, 2019, the day of the 

press release, reached an intraday high of $0.98—an approximately sixteen percent increase—

before closing at $0.89. 

 

 

 

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SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
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II. Costello Defrauded Two Advisory Clients and Engaged in Insider Trading 

38. In July 2019, Costello became an investment adviser to a 65-year-old real estate 

agent (“Advisory Client 1”) and her husband, a 68-year-old retiree (“Advisory Client 2”) 

(together, “the Advisory Clients”). 

39. As their investment adviser, Costello owed a fiduciary duty to act in the best 

interest of the Advisory Clients at all times. Costello breached that duty in numerous ways. 

A. Costello Made Materially False Statements to the Advisory Clients, Failed to 
Act in the Best Interest of the Advisory Clients, and Failed to Make Full and 
Fair Disclosure of Conflicts of Interest 

40. Costello first met the Advisory Clients in January 2019. Costello made numerous 

misrepresentations to them concerning his background, including that he is the youngest hedge 

fund billionaire ever, that he has an MBA from Harvard University, that he is licensed to manage 

money and investments, and that he had served in the military with the Special Forces.  

41. These false credentials led the Advisory Clients to hire Costello to manage their 

joint brokerage account (“Brokerage Account A”). 

42. On July 14, 2019, the Advisory Clients opened Brokerage Account A and funded 

Brokerage Account A with $4,000,600. 

43. On July 20, 2019, the Advisory Clients signed a “Trading Authorization Form” 

that designated Costello as their authorized agent. The Advisory Clients agreed to pay Costello 

twenty percent of the profits in Brokerage Account A. Costello told the Advisory Clients that he 

was waiving his typical two percent management fee as a “friends and family” discount.  

44. The Advisory Clients provided Costello with discretion over, and full access to, 

Brokerage Account A. Costello accessed Brokerage Account A electronically using Advisory 

Client 1’s username and password. The Advisory Clients did not direct or execute any trades in 

Brokerage Account A. 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
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 (212) 336-1100 

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45. Costello told Advisory Client 1 not to sign into Brokerage Account A while he 

was signed into the account. He also instructed Advisory Client 1 that, if contacted by Brokerage 

Firm A, she should falsely state that she placed all trades in the account and that she should ask 

the brokerage firm not to restrict her account in response to any trading activity.  

46. Although Costello had offered to develop a diverse financial portfolio for the 

Advisory Clients, all of the investments in Brokerage Account A were in microcap companies 

that Costello controlled or in which he personally invested.  

47. For example, Costello purchased 555,000 common shares and 250,000 preferred 

shares of Canal Capital Corporation (“Canal Capital”), for a total purchase price of over $80,000, 

in Brokerage Account A. Canal Capital was a shell company that Costello was directing others to 

promote on Twitter and whose stock Costello had purchased in his own account.  

48. On November 1, 2019, the Commission suspended trading in Canal Capital’s 

common and preferred stock. Prior to the announcement of the trading suspension, Costello had 

sold over 489,000 shares of Canal Capital preferred stock in his own account for over $109,000 

in profits. Costello, who did not disclose this trading to the Advisory Clients, did not sell any of 

the Canal Capital stock that he had purchased in Brokerage Account A on their behalf. 

B. Costello Engaged in Insider Trading in Brokerage Account A 

49. Costello also used Brokerage Account A to purchase and sell GRNF stock while 

he was the CEO and controlling shareholder of the company and in possession of material, 

nonpublic information. 

50. As GRNF’s CEO and controlling shareholder, Costello had a fiduciary duty and 

other relationship of trust with GRNF and its shareholders that obligated him not to trade on 

GRNF’s information for his personal benefit. 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
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51. In fact, Costello knew that he should not purchase any GRNF stock on the open 

market because he was an insider with material, nonpublic information about the future plans of 

the company and, given his access to this information, purchasing stock may violate the 

securities laws.  

52. Nevertheless, Costello purchased over 670,000 shares of GRNF stock in 

Brokerage Account A in advance of a July 22, 2019, Form 8-K filing announcing that GRNF 

would change its name from “Discovery Gold Corporation” to “GRN Holding Corporation” and 

would request to change its trading symbol accordingly. 

53. The information contained in the July 22, 2019 Form 8-K was material because it 

signaled to investors that GRNF was taking actual steps toward becoming a purported cannabis 

conglomerate. GRNF’s share price increased 137 percent on the day the Form 8-K was issued. 

54. The information contained in the July 22, 2019 Form 8-K was nonpublic because, 

prior to the filing, it was not broadly disseminated to the investing public. 

55. Between July 22 and July 25, 2019, Costello sold the GRNF shares he had 

acquired in Brokerage Account A for approximately $150,000 in profits. Costello included these 

profits in an invoice that he sent to the Advisory Clients, who paid him twenty percent of the 

realized profits on Costello’s trading of GRNF in Brokerage Account A. 

56. Based on their agreement with Costello, the Advisory Clients made two payments 

to Costello totaling $37,916.05, including for twenty percent of the profits from the purchase and 

sale of GRNF stock. 

57. In October 2019, Brokerage Firm A informed the Advisory Clients that it had 

decided to end its business relationship with them.  

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
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58. At Costello’s instruction, the Advisory Clients thereafter opened Brokerage 

Account B at a different brokerage firm and transferred approximately $1.27 million from 

Brokerage Account A to Brokerage Account B. 

59. Like with Brokerage Account A, the Advisory Clients gave Costello full authority 

over the new brokerage account at Brokerage Firm B, in which Costello continued to trade 

microcap companies on the Advisory Client’s behalf until approximately February 2020. 

60. At the end of October 2019, the securities remaining in Brokerage Account A 

were valued at approximately $2.9 million. By the end of April 2020, the month before the 

Advisory Clients began to liquidate the stocks Costello had purchased in Brokerage Account A, 

the value of those securities had declined by approximately 65 percent. 

61. At the end of February 2020, the securities in Brokerage Account B were valued 

at approximately $299,700. As of the end of June 2022, the value of those securities had declined 

by approximately 97 percent. 

C. Costello Defrauded the Advisory Clients in Connection with the Sale of 
GRNF Stock 

62. Around the time that the Advisory Clients hired Costello to manage Brokerage 

Account A, the Advisory Clients also agreed to purchase nine million shares of GRNF stock 

directly from Costello for $1.8 million (i.e., $0.20 per share).  

63. This $1.8 million purchase price represented a markup by Costello of over 9,000 

percent from the price of $0.002 per share that Costello had paid for those same shares of GRNF 

stock the previous month. 

64. Costello failed to fully and fairly disclose to the Advisory Clients that he had 

acquired his shares of GRNF stock for $0.002 per share and that the $1.8 million purchase price 

reflected a markup of over 9,000 percent. 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
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65. On July 23, 2019, the Advisory Clients paid for the shares by a cashier’s check 

written to GRN Funds. 

66. In approximately April 2020, after numerous requests, Costello sent to the 

Advisory Clients what purported to be share certificates reflecting their ownership of 9.5 million 

shares of GRNF stock. 

67. In approximately October 2020, Costello directed GRNF to issue nine million 

shares of GRNF stock to the Advisory Clients. Although the share purchase agreement for those 

shares was between the Advisory Clients and GRN Funds, Costello directed that new shares be 

issued by GRNF rather than transferring the shares he owned through GRN Funds and 

purportedly sold to the Advisory Clients. 

68. Despite having instructed GRNF to issue new shares to the Advisory Clients 

rather than transferring GRN Funds’s shares to the Advisory Clients, Costello never transferred 

the $1.8 million the Advisory Clients paid for the stock to GRNF. 

III. Costello Obtained Approximately $700,000 from the Sale of GRN Holding (WA) 
Stock Based on Misrepresentations 

69. From at least July to November 2019, Costello solicited the Advisory Clients and 

11 other investors to invest in a “family and friends” share offering for GRN Holding (WA).  

70. Although GRN Holding (WA) shares the “GRN Holding Corporation” name with 

the publicly traded GRNF, it is a separate, private company incorporated by Costello in a 

different state and initially owned solely by Costello.  

71. Costello misled investors in GRN Holding (WA) to believe, however, that they 

were receiving shares of the publicly traded GRNF entity. 

72. For example, Costello sent the Advisory Clients the subscription agreement for 

their investment in GRN Holding (WA) in the same email in which he sent the share purchase 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
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agreement for the nine million shares of GRNF. The subject line of the email was simply 

“Subscription Agreement and Common Shares,” and in his email Costello did not differentiate 

between the two entities. 

73. Another investor (“Investor 1”) expressed to Costello that he and his father 

(“Investor 2”) were interested in investing in GRNF after seeing the performance of the publicly 

traded GRNF stock. Costello offered Investor 1 and Investor 2 a “friends and family” deal if they 

each invested $25,000. When Costello sent Investor 1 and Investor 2 the subscription agreement 

for their investments, however, Costello did not differentiate between GRNF and the entity in 

which Investor 1 and Investor 2 would actually be investing. 

74. Like the Advisory Clients, other investors in GRN Holding (WA) also believed 

that Costello was a billionaire with a Harvard MBA, a military veteran, and experienced in the 

financial industry. These investors also believed that Costello owned legitimate, revenue-

generating businesses that could potentially be merged into GRNF. 

75. For example, Costello emailed Investor 1 and Investor 2 information about his 

purported “banking program” at Pacific Banking Corp. The materials described Pacific Banking 

Corp. as providing “safe, secure & compliant cannabis banking.” As alleged above, Pacific 

Banking Corp. was not registered to conduct business as a bank or money services business.  

76. In total, Costello obtained approximately $700,000 in investments for GRN 

Holding (WA) from 13 investors, including $250,000 from the Advisory Clients and $25,000 

from each of Investor 1 and Investor 2. 

 

 

 

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IV. Costello Obtained Approximately $200,000 from the Sale of Hempstract Stock 
Based on Misrepresentations and then Misappropriated a Portion of the Funds 

77. Beginning in at least January 2020, Costello began purchasing shares of RVDO 

on the open market. Costello planned to merge Hempstract, a private company that he co-owned, 

into RVDO. 

78. Costello made misrepresentations to secure investments for Hempstract. 

79. For example, in approximately March 2020, Costello made a presentation to 

potential investors, pitching an opportunity to purchase shares of Hempstract before it became a 

public company. During that meeting, Costello falsely stated that he had sixteen years of 

investment banking experience on Wall Street, that he was a banker in the cannabis industry who 

managed money for over 400 clients, and that he had over a billion dollars of equity in his own 

fund. Each of those representations was false. 

80. Costello also told potential investors that any shares they purchased would be 

restricted from trading for six months, at which point they could sell their shares through a 

brokerage account. However, because RVDO was a shell company that was not an SEC-

reporting company, any shares of RVDO would be required to be held for one year. 

81. In total, between March and August 2020, Costello obtained approximately 

$200,000 in investments for Hempstract from 19 investors. Of that amount, checks for 

approximately $50,000 from four investors were written to, and deposited in, a bank account for 

a separate entity controlled by Costello. Costello never transferred the funds he received for the 

four investors’ investments in Hempstract. 

V. Costello and Ferraro Engaged in Stock Promotion Schemes 

82. Costello and Ferraro met in mid-2019. Ferraro was a GRNF investor who had 

posted about the company on various investor message boards. 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
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83. Ferraro controlled a Twitter account with the handle “@computerbux” that at one 

point had over 10,000 followers. Ferraro posted at least 7,900 tweets in 2019 and at least 5,000 

tweets from January through June 2020. Nearly 90 percent of these tweets referenced a specific 

stock or stocks. 

84. Costello and Ferraro used Ferraro’s Twitter account to perpetrate at least five 

stock promotion schemes (each a “Stock Promotion Scheme” and collectively, the “Stock 

Promotion Schemes”). In each Stock Promotion Scheme, Ferraro recommended a penny stock 

that he and/or Costello owned to Ferraro’s Twitter followers and the public. As he wrote in a 

January 2020 email to Costello summarizing their schemes, Ferraro understood that his 

“announce[ments]” on Twitter would cause the stock to “run[ ] on hype,” i.e., cause the stock 

price to increase. In his promotional tweets, Ferraro did not disclose that he and/or Costello 

intended to sell their own holdings of those stocks into the inflated market that Ferraro’s tweets 

helped create. Ferraro also did not disclose that Costello had agreed to pay Ferraro a portion of 

Costello’s profits from certain of the Stock Promotion Schemes. 

A. The Canal Capital Corporation (“Canal Capital”) Stock Promotion Scheme 

85. On October 7, 2019, Costello learned from an investor in Canal Capital, a defunct 

company, that former executives at Canal Capital had agreed to sell their shares of Canal Capital 

to the investor. Without that investor’s knowledge, on that day Costello began buying shares of 

Canal Capital on the open market, and by October 10, 2019, Costello had accumulated over one 

million shares of Canal Capital common stock (“COWP”) and over 740,000 shares of Canal 

Capital preferred stock (“COWPP”). 

86. Costello messaged Ferraro: “COWP and COWPP attack it hard [I] have 70% of 

float already.” Float refers to the total number of shares of a stock that are available for public 

investors to buy and sell. 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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87. On October 10, 2019, Ferraro began to purchase shares of Canal Capital stock in 

his brokerage account. 

88. On October 10, 2019, Ferraro began to promote Canal Capital on Twitter, and 

would ultimately tweet about Canal Capital at least 270 times over the next three weeks. 

Ferraro’s promotional tweets included (i) October 10, 2019 posts that “[Costello] owns 70% and 

believes it will be a Michigan Avenue dispensary” and that he was “betting over 1000% gains” 

for COWPP, (ii) October 17, 2019 tweets that “new highs [are] coming” for COWP and COWPP 

and that “[t]his is your shot … time is of the essence,” and (iii) an October 22, 2019 tweet that 

COWPP is “[l]ooking like it’s gearing for a 700% - 1000% run.”  

89. At no point did Ferraro disclose that he or Costello were selling Canal Capital 

stocks during this time period. 

90. Ferraro’s tweets coincided with significant increases in the share price and trading 

volume in COWP and COWPP, and the Commission ultimately suspended trading in Canal 

Capital securities on November 1, 2019.  

91. Prior to the institution of the trading suspension, Costello sold over 489,000 

shares of COWPP for over $109,000 in profits. Ferraro profited approximately $41,000 from his 

own trading. 

B. The Foothills Exploration, Inc. (“FTXP”) Stock Promotion Scheme 

92. On December 9, 2019, Costello acquired over 7.6 million shares of FTXP. That 

day, the stock closed at $0.007 per share.  

93. That evening, Costello messaged Ferraro about Ferraro promoting FTXP, and 

Costello agreed to share 30 percent of his profits with Ferraro. 

94. Costello instructed Ferraro to wait until 10 a.m. the next day because he planned 

to purchase additional shares. 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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95. On the evening of December 9, Ferraro teased the following in a tweet: “I have a 

MASSIVE MASSIVE MASSIVE stock to announce with a PERFECT chart. Stay tuned. 

Announcement tomorrow morning!!!!!!” 

96. At 9:23 a.m. on December 10, Ferraro asked Costello what “central theme” could 

be used to promote FTXP. Costello replied at 9:41 a.m., writing only: “Large reserves.”  

97. In the meantime, at 9:32 a.m., Ferraro tweeted that “[t]he new stock I’m calling at 

10 am has a 90% [chance] of being a 60 bagger within 30 days. That’s 6,000% gain friends!”  

98. At 9:44 a.m., after confirming with Costello that he should start tweeting, Ferraro 

tweeted: “The huge 60 bagger call is $FTXP!!!!!!!!!!!!!!!!!!!!!!! The word on the street is they hit 

the motherlode!!!!!!! Huge reserve found and they got it all! And the actual public float around 

2M shares!!!” 

99. Ferraro would go on to post at least 90 promotional tweets about FTXP on 

December 10—including, for example, “$FTXP A hedge I know owns 5M of this” and “$FTXP 

On the verge of a MAJOR MAJOR MAJOR breakout!!!!!!!!!!”—and over 100 additional tweets 

over the next two weeks. FTXP’s stock price closed at $0.0273 on December 10, a 290 percent 

increase over the prior day’s close, and reached an intraday high of $0.0465 on December 11. 

100. At no point did Costello or Ferraro disclose that Costello was selling FTXP stocks 

during this time period or that Ferraro would receive a share of Costello’s profits. 

101. Costello, who began selling his shares of FTXP shortly after Ferraro began 

tweeting about FTXP, sold his entire position by December 13, 2019 for profits of approximately 

$113,000. Costello shared over $23,000 of those profits with Ferraro. 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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C. The REMSleep Holdings, Inc. (“RMSL”) Stock Promotion Scheme 

102. On December 13, 2019, Costello acquired over 4.5 million shares of RMSL, and 

its stock closed at $0.02 that day. Costello purchased an additional 121,000 shares of RMSL on 

the morning of December 16. 

103. Also on the morning of December 16, Costello messaged Ferraro to share his 

position: “RMSL. In for 4 mil total.” Ferraro replied that he would “start researching for noon so 

I have a story to tell.”  

104. At 10:57 a.m. on December 16, Ferraro tweeted: “T minus 1 hour and 4 

minutes….” 

105. At noon, referencing a predicted 1,000 percent gain, Ferraro tweeted: “And the 

huge 10 bagger is……. $RMSL !!!!!!!!!!!!!!!!!!!!!!! $RMSL has entered the VERY 

LUCRATIVE Sleep apnea medical device market!!! They put out PR’s regularly. They should 

have a market cap over $10M!!! The chart is screaming for a massive run up!!!!” 

106. Ferraro ultimately posted at least 100 tweets on December 16 and over 200 

additional tweets over the next two weeks promoting RMSL. RMSL’s stock price reached an 

intraday high of $0.0368 on December 16 and closed at $0.031 that day, a 55 percent increase 

over the prior day’s close. 

107. At no point did Costello or Ferraro disclose that Costello was selling RMSL 

stocks during this time period or that Ferraro would receive a share of Costello’s profits. 

108. Costello began selling his shares of RMSL shortly after Ferraro began tweeting 

about RMSL on December 16, and sold his entire position by December 19 for profits of 

approximately $64,000. Costello shared $9,100 of those profits with Ferraro. 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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D. The Clancy Systems International (“CLSI”) Stock Promotion Scheme 

109. From October 3 through October 7, 2019, Costello accumulated over 600,000 

shares of CLSI.  

110. On October 7, Ferraro began promoting CLSI, tweeting that it was “Looking hot” 

and that it “looks prime.” On October 8, he tweeted a predicted CLSI share price increase “on 

news.” 

111. Also on October 7, Costello began selling his CLSI shares. He sold his entire 

CLSI position on October 7 and October 8, profiting approximately $13,000. 

112. Costello began buying CLSI shares again in January 2020, and by the end of the 

month he held over 4.2 million shares. On February 5, 2020, Costello purchased an additional 

75,000 shares of CLSI. 

113. On Friday, February 7, Costello messaged Ferraro: “Took a large position in 

[CLSI] 2 mil today if you want to run it. … Buying more of [CLSI] on monday.” Three minutes 

later, Ferraro responded: “I’ll start on it now.” Shortly thereafter, Ferraro tweeted that CLSI 

“looks like a good bet big time,” and later that day, Ferraro tweeted that CLSI “might be one of 

the biggest of the year.” 

114. Ferraro’s promotional tweeting about CLSI continued in the ensuing days, 

including tweets on February 13 that his followers should “TRUST THE BUX” and “LOAD 

HEAVY” and on February 18 that CLSI “is going to be a 10 bagger :).” 

115. In total, from February 10 through February 19, Ferraro posted over 180 tweets 

promoting CLSI. At no point did Costello or Ferraro disclose that Costello was selling CLSI 

stocks during this time period. 

116. Costello sold all of his CLSI shares from February 10 through February 19, 

generating profits of approximately $29,000. 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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E. The RVDO and HPST Stock Promotion Scheme 

117. In February and March 2020, Costello accumulated nearly 2 million shares of 

RVDO.  

118. On March 26, 2020, Ferraro wrote to Costello: “RVDO ?” Costello responded: 

“Accumulate don[’t] post.” 

119. On March 26, Ferraro also messaged another investor: “Let’s keep the RVDO 

tweets to zero till filings. . . .  It doesn’t have filings for six years and I don’t want to give the 

SEC a reason to suspend trading until the financials are filed and it gets current.” 

120. On April 23, 2020, RVDO posted quarterly and annual reports for periods in 2016 

through 2019 on the OTC Link website.  

121. On April 28, RVDO announced that it had signed a strategic non-binding letter of 

intent with Hempstract. 

122. Also on April 28, Ferraro began a months-long promotional campaign of RVDO 

on Twitter. His tweets included, for example, a post on April 29 that “[RVDO] is one you’ll want 

to accumulate for sure.”  

123. On May 20, 2020, Ferraro tweeted, regarding RVDO: “BIG. THINGS. 

HAPPENING.” On May 21, Ferraro tweeted that RVDO bidders “better move those bids up!” 

because “NEWS IS COMING” and “Ain’t nobody selling.” 

124. That same day, May 21, Costello began selling his RVDO shares. Through 

RVDO sales he made from May 21 through June 8, Costello profited approximately $314,000. 

During that period, Ferraro promoted RVDO in over 250 tweets. In total, from April through 

July 2020, Ferraro posted a total of over 1,300 tweets promoting RVDO. 

125. Ferraro continued to post about RVDO on his Twitter account throughout the 

remainder of 2020 and into 2021, including after RVDO changed its ticker symbol to HPST. 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
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 (212) 336-1100 

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126. In early January 2021, Ferraro’s tweets about HPST included, on January 4, 

“$HPST Time for the hell yes” and, on January 5, “$HPST Float lock status is looking 

reallllllllly close” and “$HPST Accumulation increasing. Shares getting scarce IMO.” On 

January 5, Ferraro also shared a HPST press release announcing that the company had 

purportedly completed the extraction process on over 36,000 pounds of raw hemp, tweeting, 

“$HPST That’s about a $10M contract for the first one.......WOW!!!!!!!” and “$HPST I’m 

betting we see a supplemental PR with numbers :).” 

127. On January 6, 2021, Costello sold over 70,000 shares of HPST, generating profits 

of approximately $41,000. 

128. At no point did Costello or Ferraro disclose that Costello was selling RVDO or 

HPST stocks during these time periods. 

VI.  Ferraro Separately Engaged in Stock Promotion Schemes 

129. Ferraro also engaged in his own Stock Promotion Schemes in July 2019, 

December 2019, and January 2020, generating profits of approximately $68,000. 

A. The Powerdyne International Inc. (“PWDY”) Stock Promotion Scheme 

130. From July 12 through July 24, 2019, Ferraro purchased over 25 million shares of 

PWDY, a stock he had lightly traded and tweeted about during the prior month.  

131. From July 25 through July 29, Ferraro posted at least 70 promotional tweets about 

PWDY. These tweets included “$PWDY Is about to explode” on July 25, “$PWDY … to triple 

in value in the next 5 trading days IMO,” the following day, and, on July 29, “$PWDY is about 

to breakout!” 

132. At no point did Ferraro disclose that he was selling PWDY stocks during this time 

period. 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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133. Ferraro sold his entire PWDY from July 25 through July 29. His profits from this 

trading activity were approximately $47,000. 

B. The South Beach Spirits (“SBES”) Stock Promotion Schemes 

134. From December 3 to December 5, 2019, Ferraro purchased 4.7 million shares of 

South Beach Spirits (“SBES”) at prices ranging from $0.0038 to $0.0047 per share. During this 

time, he tweeted about a potential “breakout” for the stock.  

135. On December 6, Ferraro tweeted: “$SBES My wall street friends say that there is 

a deal in the works that will bring this well over $2. Very interesting indeed.” On that day he 

again touted a potential “breakout” for SBES, and tweeted that “I think $.08 is a good initial 

target that will be hit easily.” 

136. By December 9, Ferraro had sold all of his SBES shares, primarily through the 

sale of 4.5 million shares on December 9 at share prices ranging from $0.0075 to $0.0081. In 

total, from December 3 through December 9, Ferraro posted a total of 39 promotional tweets 

about SBES. These included a tweet on the evening of December 8, shortly before he sold the 

bulk of his position, that “I saw there is a second $10B opportunity for this year in $SBES.”  

137. At no point did Ferraro disclose that he was selling SBES stocks during this time 

period. 

138. Ferraro profited approximately $16,000 from his trading in SBES from December 

3 through December 9. 

139. From January 17 to January 22, 2020, Ferraro again acquired a position in SBES, 

this time purchasing 2.5 million shares at share prices ranging from $0.0091 to $0.0102.  

140. During this time, Ferraro tweeted that “filings [are] expected” for SBES and a 

“breakout” was coming.  

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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141. Ferraro then sold all of his shares on January 24, 2020, while posting at least 35 

promotional tweets about SBES. These tweets included a prediction that “$SBES will announce 

something” and “news and filings will take it [to] dollar land,” and urging his followers to “[g]et 

in BEFORE the filings.” 

142. At no point did Ferraro disclose that he was selling SBES stocks during this time 

period. 

143. Ferraro’s January 24 sales of SBES were made at share prices ranging from 

$0.0100 to $0.0132, for total profits of approximately $5,000. 

FIRST CLAIM FOR RELIEF 
Violations of Securities Act Section 17(a) 

(Both Defendants) 
 

144. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 143. 

145. Defendants, directly or indirectly, singly or in concert, in the offer or sale of 

securities and by the use of the means or instruments of transportation or communication in 

interstate commerce or the mails, have (1) knowingly or recklessly employed one or more 

devices, schemes or artifices to defraud, (2) knowingly, recklessly, or negligently obtained 

money or property by means of one or more untrue statements of a material fact or omissions of 

a material fact necessary in order to make the statements made, in light of the circumstances 

under which they were made, not misleading, and/or (3) knowingly, recklessly, or negligently 

engaged in one or more transactions, practices, or courses of business which operated or would 

operate as a fraud or deceit upon the purchaser. 

146. By reason of the foregoing, Defendants, directly or indirectly, singly or in concert, 

have violated and, unless enjoined, will again violate Securities Act Section 17(a) [15 U.S.C. 

§ 77q(a)]. 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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SECOND CLAIM FOR RELIEF 
Violations of Exchange Act Section 10(b) and Rule 10b-5 Thereunder 

(Both Defendants) 
 

147. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 143.  

148. Defendants, directly or indirectly, singly or in concert, in connection with the 

purchase or sale of securities and by the use of means or instrumentalities of interstate 

commerce, or the mails, or the facilities of a national securities exchange, knowingly or 

recklessly have: (1) employed one or more devices, schemes, or artifices to defraud, (2) made 

one or more untrue statements of a material fact or omitted to state one or more material facts 

necessary in order to make the statements made, in light of the circumstances under which they 

were made, not misleading, and/or (3) engaged in one or more acts, practices, or courses of 

business which operated or would operate as a fraud or deceit upon other persons. 

149. By reason of the foregoing, Defendants, directly or indirectly, singly or in concert, 

have violated and, unless enjoined, will again violate Exchange Act Section 10(b) [15 U.S.C. 

§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

THIRD CLAIM FOR RELIEF 
Violations of Advisers Act Sections 206(1) and (2) 

(Costello) 

150. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 143.  

151. At all relevant times, Defendant Costello was an investment adviser under 

Advisers Act Section 202(11) [15 U.S.C. § 80b-2(11)]. 

152. Defendant Costello, by use of the mails or any means or instrumentality of 

interstate commerce, directly or indirectly has: (1) knowingly or recklessly employed one or 

more devices, schemes, or artifices to defraud any client or prospective client, and/or (2) 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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knowingly, recklessly, or negligently engaged in one or more transactions, practices, and courses 

of business which operated or would operate as a fraud or deceit upon any client or prospective 

client. 

153. By reason of the foregoing, Defendant Costello, directly or indirectly, singly or in 

concert, has violated and, unless enjoined, will again violate Advisers Act Sections 206(1) and 

(2) [15 U.S.C. §§ 80b-6(1) and 80b-6(2)]. 

PRAYER FOR RELIEF 

154. WHEREFORE, the Commission respectfully requests that the Court enter a Final 

Judgment: 

I. 

155. Permanently enjoining Costello and his agents, servants, employees, and 

attorneys, and all persons in active concert or participation with any of them, from violating, 

directly or indirectly, Securities Act Section 17(a) [15 U.S.C. § 77q(a)], Exchange Act Section 

10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], and Advisers Act 

Sections 206(1) and 206(2) [15 U.S.C. §§ 80b-6(1) and 80b-6(2)]; 

II. 

156. Permanently enjoining Ferraro and his agents, servants, employees, and attorneys, 

and all persons in active concert or participation with any of them, from violating, directly or 

indirectly, Securities Act Section 17(a) [15 U.S.C. § 77q(a)] and Exchange Act Section 10(b) [15 

U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]; 

 
III. 

157. Ordering Defendants to disgorge all ill-gotten gains they received directly or 

indirectly, with pre-judgment interest thereon, as a result of the alleged violations pursuant to 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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Exchange Act Sections 21(d)(3) [15 U.S.C. § 78u(d)(3)], 21(d)(5) [15 U.S.C. § 78u(d)(5)], and 

21(d)(7) [15 U.S.C. § 78u(d)(7)]; 

IV. 

158. Ordering Defendants to pay civil monetary penalties under Securities Act Section 

20(d) [15 U.S.C. § 77t(d)], Exchange Act Sections 21(d)(3) [15 U.S.C. § 78u(d)(3)] and 21A [15 

U.S.C. §§ 78u-1(a)(1)-(2)], and Advisers Act Section 209(e) [15 U.S.C.§ 80b-9(e)];  

V. 

159. Permanently prohibiting Costello from serving as an officer or director of any 

company that has a class of securities registered under Exchange Act Section 12 [15 U.S.C. 

§ 78l] or that is required to file reports under Exchange Act Section 15(d) [15 U.S.C. § 78o(d)], 

pursuant to Securities Act Section 20(e) [15 U.S.C. § 77t(e)] and Exchange Act Section 21(d)(2) 

[15 U.S.C. § 78u(d)(2)]; 

VI. 

160. Permanently prohibiting Defendants from participating in any offering of a penny 

stock, including engaging in activities with a broker, dealer, or issuer for purposes of issuing, 

trading, or inducing or attempting to induce the purchase or sale of any penny stock, under 

Securities Act Section 20(g) [15 U.S.C. § 77t(g)] and Exchange Act Section 21(d)(6) [15 U.S.C. 

§ 78u(d)(6)]; and 

 
 
 
 
 
 
 
 
 
 
 

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COMPLAINT Securities and Exchange Commission 
SEC V. COSTELLO ET AL. 100 Pearl Street, Suite 20-100 
 New York, NY 10004-2616 
 (212) 336-1100 

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VII. 

161. Granting any other and further relief this Court may deem just and proper. 

 
Dated: September 29, 2022    

 
 
Respectfully submitted, 
 

 s/ Pascale Guerrier    
 Pascale Guerrier 
 Conditionally Admitted Pursuant to LCR 
 83.1(c)(2) 
 Samuel Kalar 
 Conditionally Admitted Pursuant to LCR 
 83.1(c)(2) 
 Tiantong Wen 
 Conditionally Admitted Pursuant to LCR 
 83.1(c)(2) 

Securities and Exchange Commission 
100 Pearl Street, Suite 20-100 

 New York, NY 10004-2616 
(212) 336-1100 
Email: [email protected] 
 
Attorneys for Plaintiff Securities and 
Exchange Commission 

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