SEC Charges Former Army Financial Counselor Who Defrauded Gold Star Family Members

The Securities and Exchange Commission (SEC) has taken action against Caz L. Craffy, a former U.S. Army financial counselor, charging him with defrauding Gold Star family members and others through unauthorized trading and recommending inappropriate investment strategies.

According to the SEC’s complaint, Craffy, based in Colts Neck, New Jersey, had the authority to provide general financial education to families of service members in his role as a U.S. Army financial counselor. However, between May 2018 and November 2022, Craffy allegedly abused his position and exploited grieving family members by instructing them to transfer their benefits, including life insurance and survivor benefits, into brokerage accounts that he managed outside his official duties with the U.S. Army. Once the funds were deposited, Craffy engaged in unauthorized trading and recommended strategies that did not align with his clients’ risk profiles and investment objectives. These actions exposed them to higher risks, including excessive trading, lack of diversification, and concentrated investments. Over the course of 54 months, Craffy’s customers incurred commissions and fees exceeding $1.64 million, a significant portion of which Craffy retained. The accounts he managed suffered realized losses of approximately $1.79 million, with additional unrealized losses amounting to around $1.8 million. In one particularly egregious instance, Craffy misappropriated $50,000 from the Individual Retirement Account (IRA) of a minor child whose parent had died while on active duty.

The complaint filed against Craffy charges him with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5, and Regulation Best Interest (Rule 15l-1(a)(1) of the Exchange Act).

The SEC acknowledges the cooperation and support of several entities in this case, including the U.S. Attorney’s Office for the District of New Jersey, the Financial Industry Regulatory Authority, the Army Criminal Investigation Division, the Defense Criminal Investigative Service, the FBI, and Homeland Security Investigations. The SEC’s ongoing investigation is being carried out by Michael Ellis, Bari Nadworny, Roseann Daniello, and Ariel Atlas from the SEC’s New York Regional Office, under the supervision of Hane L. Kim of the Retail Strategy Task Force and Sheldon Pollock of the New York Regional Office. Alex Lefferts from the Enforcement Division’s Office of Investigative and Market Analytics provided assistance in the investigation. The litigation will be led by Hayden Brockett, Ms. Nadworny, and Ms. Atlas.