A former registered representative faces up to 20 years in prison for defrauding the families of dead servicemen by persuading them to invest in firms he worked for while earning more than $1 million in kickbacks in the process.
New Jersey-based agent Caz Craffy pleaded guilty in federal court this week to six counts of wire fraud, securities fraud and making false statements on a loan application and to a federal agency.
His victims included several Gold Star families who lost family members during their military service, according to James Dennehy, the FBI's special agent in charge of the Newark office.
“Gold Star families are given a title that no one would choose because it means they have paid the ultimate sacrifice for this country,” Dennehy said. “Craffy took advantage of his position and defrauded families who were already going through a tremendous amount of suffering.”
Craffy worked as an Army civilian employee at Joint Base-McGuire-Dix-Lakehurst in New Jersey as a financial advisor to the U.S. Army Survivability Services, part of the Office of Incident Assistance. According to court records, the office provides long-term support to families of fallen servicemen.
Craffy was also a major in the Army Reserves, but simultaneously worked for two financial firms during the period in question. according to his BrokerCheck profile.
Between 2017 and 2021, he worked for Newbridge Securities before joining Monmouth Capital Management for a year (although the firms are not named in court documents). FINRA banned Monmouth Capital Management by the industry last June for breaching Best Interest's Duty of Care Regulation and for allegedly making false statements on its CRS Form.
However, Craffy did not tell the military that he also worked for these financial firms.
When an active-duty service member dies, that person's military branch will provide survivor benefits to their Gold Star family, including a $100,000 payment from the U.S. military within two weeks of their death, as well as up to $400,000 dollars of life insurance benefits hereafter. month.
The Army administers the benefits through the Office of Case Assistance, with a financial advisor like Craffy assigned to help Gold Star families navigate information and make informed choices about survivor benefits, college savings plans and health care, among others.
But starting in 2018, Craffy sought to enrich himself by “misrepresenting the extent of his responsibilities” as a financial adviser by forcing families to invest their profits in brokerage accounts in Newbridge and Monmouth.
In some cases, the Army would assign Craffy to work with families. Craffy would also find victims by accessing internal military databases to find families of recently deceased service members.
Although the Army did not authorize Craffy to make investment recommendations, he asked families to invest their benefits in accounts at firms where he worked without telling the families that he worked for those firms (and did so without the Army's knowledge). . He also did not tell them that he would make commissions on trades made with the funds they invested.
The Justice Department found that Craffy caused about 29 individuals to transfer about $9.9 million in survivor benefits to accounts at two firms where Craffy worked.
Craffy would encourage families to open investment accounts and lie about their net worth and that they preferred an “aggressive” investment strategy, which led to lower oversight from financial firms.
Craffy profited from trading commissions, even at the expense of family funds; in one example in January 2022, Craffy spent about $287,000 of a family's money (more than half of their investment) on stocks, selling them nine days later at significantly lower prices. The Gold Star family lost about $49,000 on the trade, but Craffy received $8,900 in commissions.
Between May 2018 and November 2022, Gold Star families lost more than $3.7 million, while Craffy earned more than $1.4 million in commissions, according to the Justice Department.
FINRA permanently barred Craffy from the industry, and the Securities and Exchange Commission has charges pending against him. In addition to jail time, he faces fines of up to $5 million or twice the crime's profits and losses (whichever is greater).
Craffy is scheduled to be sentenced on August 21.