U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25770 / July 7, 2023
Securities and Exchange Commission v. Caz L. Craffy, No. 23-civ-3639 (D.N.J. filed July 7, 2023)
SEC Charges Former Army Financial Counselor Who Defrauded Gold Star Family Members
The Securities and Exchange Commission today charged former U.S. Army financial counselor Caz L. Craffy for defrauding Gold Star family members and others by engaging in unauthorized trading—including of life insurance and family survivor benefits they received following the death of an active duty service member—and for recommending excessive trades and higher risk strategies that did not match customers’ investment profiles.
According to the SEC’s complaint, Craffy, of Colts Neck, New Jersey, was permitted to provide general financial education to service members’ families through his job as a U.S. Army financial counselor. However, as alleged, between May 2018 and November 2022, Craffy used his position and access to manipulate grieving family members by directing them to transfer their benefits into brokerage accounts he managed outside of his official duties with the U.S. Army. Once the funds were deposited, Craffy engaged in unauthorized trading and trading that did not match his customers’ risk profiles and investment objectives and exposed them to higher risks of loss from excessive trading, concentration and lack of diversification. In that 54-month span, Craffy’s customers incurred more than $1.64 million in commissions and fees, most of which Craffy pocketed, while the accounts he managed suffered approximately $1.79 million in realized losses and faced additional unrealized losses of approximately $1.8 million. In one particularly egregious offense, Craffy misappropriated $50,000 from the IRA account of a minor child whose parent had died on active duty.
The complaint charges Craffy with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Regulation Best Interest (Rule 15l-1(a)(1) of the Exchange Act).
The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of New Jersey, Financial Industry Regulatory Authority, Army Criminal Investigation Division, Defense Criminal Investigative Service, FBI, and Homeland Security Investigations. The SEC’s ongoing investigation is being conducted by Michael Ellis, Bari Nadworny, Roseann Daniello, and Ariel Atlas of 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 of the Enforcement Division’s Office of Investigative and Market Analytics assisted with the investigation. The litigation will be led by Hayden Brockett, Ms. Nadworny, and Ms. Atlas.