Shortly after the December 2020 death of a soldier in active duty for the U.S. Army, his widow transferred around $370,000 in survivor benefits to the management of broker Caz Craffy, according to federal prosecutors.
She told him she wanted to "focus on a low-risk and longer-term growth strategy" for her and her stepchildren, court documents said.
Craffy, 41, who's also known as Carz Craffey, "touted his success in managing trading accounts" and told the widow he was a fiduciary acting on behalf of her family as their financial counselor assigned out of Fort Dix in New Jersey through the Army's Casualty Assistance Office, according to investigators.
He omitted the fact that the military service's rules prohibit counselors from selling investment services to Gold Star families and that he would be receiving compensation through an outside brokerage firm for her accounts, court documents stated. He convinced the widow to sign pre-filled documents falsely stating that she had a net worth of $1.1 million with "aggressive" risk tolerance seeking "maximum growth," investigators said.
After excessive and unauthorized trading in her account over the next two years, the widow's account's value fell by $207,000 — or 56% of the portfolio — with $84,000 of those losses coming in the form of commissions that went to Craffy, according to court documents.
The widow wasn't Craffy's only alleged victim. Between May 2018 and November 2022, Craffy raised $9.9 million from at least 29 Gold Star family members whose loved ones died in military service. His unauthorized and excessive trades cost them more than $3.4 million in losses, including $1.4 million in commissions, investigators said.
Craffy abused his Army position advising beneficiaries entitled to a $100,000 death gratuity and life insurance payments of up to $400,000 after a soldier dies in active duty by recommending they invest with him as their broker and making unauthorized trades that racked up commissions, the
Vulnerable group
While regulators, law enforcement and the industry often focus on the vulnerability of older adults who lose as much
"When a Gold Star family is at its lowest, they're very easy to take advantage of," Boll said. "People abandon them. The family, the friends, they don't know what to do. Instead of asking what they can do, they don't do anything."
The loss put the families "in a vulnerable position," according to Natalie Khawam of the
"A lot of people in their situation, they don't have any financial background or experience," she said. "He really forged that kind of a relationship with a lot of them, and they trusted him in that sense."
The lawyer representing Craffy, who's set to be arraigned later this month and walked free on a bond of $250,000 after his July 7 arrest, declined to comment on the allegations. Representatives for one of the brokerages that employed him during the time span covered by the case, Newbridge Securities, didn't respond to emails seeking comment.
An attorney that represented the other brokerage Craffy worked for until his November 2022 termination, Monmouth Capital Management, didn't respond to email inquiries either.
The victims of more than 1,000 unauthorized trades and other harmful conduct by Craffy included a 13-year-old girl whose mother he persuaded to give him a $50,000 loan out of an IRA created through her benefit payments, according to investigators with the Army, the FBI, the Department of Homeland Security and the SEC. Craffy also defrauded a widow with three children and a 73-year-old woman who had just lost her son, the SEC said.
"Many of Craffy's customers were comparatively financially unsophisticated," according to the SEC's complaint. "Often, they had only recently come into large amounts of money through the death of a loved one who had served in the U.S. military. Craffy knew that these customers were grieving and often unfamiliar with stocks and investing. Craffy exploited his customers' trust by recommending that they invest the survivor and insurance benefits they received, often totaling about $500,000, with him personally, sometimes by falsely stating or misleadingly implying that they were required to do so to take advantage of certain benefits."
Big turnover, big commissions
Investigators homed in on two key metrics — turnover rate and cost-to-equity ratios — as the evidence for Craffy's fraud, noting that a turnover rate above 6 and cost-to-equity higher than 20% are usually "recognized as benchmarks for excessive trading," the SEC said.
The regulator cited turnover rates as high as 10.5 and a ratio upwards of 38.6% among Craffy's clients, while FINRA's probe of Monmouth uncovered rates ranging from 6.05 to 35.24 and ratios of 21.75% to 128.5% in 110 client accounts between August 2020 and February 2023.
"Monmouth abdicated its responsibility to reasonably supervise its representatives' trading, resulting in substantial harm to customers, including Gold Star families," FINRA acting head of enforcement Chris Kelly said in a statement. "The egregiousness of the firm's sales practice and supervisory violations necessitated expulsion of the firm from FINRA membership."
The SEC case against Craffy charged him with violating antifraud laws and Reg BI. The criminal case charged him with six counts of wire fraud, plus additional crimes of making false statements in a loan application, untrue statements to a federal agency and committing acts in a personal financial interest.
"The defendant in this case used his position as an Army financial counselor to defraud Gold Star families, steal their money, and enrich himself," Attorney General Merrick Garland said in a statement. "Predatory conduct that targets the families of fallen American service members will be met with the full force of the Justice Department."
The case displays the need for stronger verification of Department of Defense financial counselors' annual disclosures, which investigators said Craffy falsified by not informing the Army of his brokerage relationships, according
"Since this story broke, I have worked tirelessly to close the legal gaps Mr. Craffy slipped through to hide his schemes, and my legislation in the NDAA will stop people from preying on families in the future," she said.
Next steps
In addition to supporting that bill, Khawam anticipates filing up to 12 complaints in FINRA arbitration seeking damages from Craffy's brokerage firms, she said. They hope to gain restitution through that process and the civil and criminal cases against Craffy, Khawam said.
"These families have been so patient and so committed to making sure that this doesn't happen to another family," Khawam said. "There are no guarantees with their situation, but they've all come closer together as they all shared the same losses in their life."
Boll's volunteer organization has benefitted from Gold Star family members attending events and speaking with veterans coping with suicidal depression and post-traumatic stress who see the connections as "a huge wakeup call," he noted. Veterans and their families fall victim to financial abuse more often than some may think, Boll said.
"There's so much fraud out there, and the internet makes it easier," he said. "Veterans don't come forward because they're embarrassed. People are embarrassed when they're victims of a crime."
