A former registered rep faces 20 years in prison for defrauding families of deceased military servicemembers, convincing them to invest in firms he worked for while pocketing more than $1 million in commissions in the process.
New Jersey-based rep Caz Craffy pleaded guilty in federal court this week to six counts of wire fraud, securities fraud and false statements in a loan application and to a federal agency.
His victims included several Gold Star families who lost their family members during their military service, according to James Dennehy, the FBI special agent in charge of the Newark field office.
“Gold Star families are given a title no one would choose because it means they’ve paid the ultimate sacrifice for this country,” Dennehy said. “Craffy took advantage of his position and defrauded families 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 counselor in the U.S. Army’s Survivor Outreach Services, a part of the Casualty Assistance Office. According to court records, the office offers long-term support for families of fallen servicemembers.
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 registering with Monmouth Capital Management for one year (though the firms aren’t named in court documents). FINRA barred Monmouth Capital Management from the industry last June for violating Regulation Best’s Interest’s Care Obligation and for allegedly making false statements on its Form CRS.
However, Craffy didn’t tell the Army he also worked for these financial firms.
When an active-duty servicemember 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 in life insurance benefits in the following months.
The Army administers the benefits through the Casualty Assistance Office, with a financial counselor like Craffy assigned to help Gold Star families navigate the information and make informed choices on survivor benefits, college saving plans and health care, among other things.
But starting in 2018, Craffy set out to enrich himself by “misrepresenting the scope of his responsibilities” as a financial counselor by getting families to invest their benefits in brokerage accounts at Newbridge and Monmouth.
In some cases, the Army would assign Craffy to work with families. Craffy would also locate victims by accessing internal military databases to find families of recently-deceased servicemembers.
Though the Army didn’t authorize Craffy to make investment recommendations, he urged families to invest their benefits in accounts at the firms where he worked without telling the families that he worked for those firms (and did so without the Army’s knowledge). He also didn’t tell them he’d 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 the two firms where Craffy worked.
Craffy would encourage the 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 the financial firms.
Craffy benefitted from commissions on trades, even at the expense of the families’ funds; in one example in January 2022, Craffy spent about $287,000 of one family’s money (more than half their investment) on stock, selling it nine days later at significantly lower prices. The Gold Star family lost about $49,000 on the trades, but Craffy pocketed $8,900 in commissions.
Between May 2018 and November 2022, the 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 pending charges against him. In addition to the prison sentence, he faces fines with a maximum of $5 million or twice the gain and loss of the crime (whichever is greater).
Craffy is scheduled to be sentenced on Aug. 21.