Army Reservist admits he scammed $10 million from Gold Star families

A New Jersey Army Reservist tricked Gold Star families into putting $10 million into an investment scheme, lost $3.7 million of it on risky financial bets, and kept $1.4 million for himself, according to a federal plea agreement.

Caz Craffy, an Army Reserve major and civilian Army employee from Colts Neck, New Jersey, admitted to federal prosecutors this week that he targeted families who had received large cash compensations after the on-duty deaths of soldiers. He convinced the families, prosecutors say, that the financial schemes he was recommending were approved by the Army.

In fact, they were risky private investments that paid Craffy $1.4 million in fees.

Craffy faces 20 years in prison and fines of up to $5 million.

“Craffy disgraced his entrusted position to care for our nation’s military families when he allegedly took advantage of them during a vulnerable time of grief,” Homeland Security Investigations Newark acting Special Agent in Charge William S. Walker said. “No family, especially our Gold Star families, should have to face further heartache after a loved one’s death by having their financial security ripped out from under them by fraudsters.”

Three jobs, one scam

Craffy’s scam on grieving Army families was made possible when he secretly installed himself in an illegal position of holding three jobs at once that allowed him to take families’ money. In two of those jobs — one as a civilian employed by the Army and one as a major in the reserves — Craffy held roles as a financial and benefits counselor for families receiving Army benefits. In those roles, he worked with Gold Star families, many of whom came to Craffy when they were suddenly thrust into the Army’s benefits world with no experience or warning after the death of a family member.

As they grieved and fought through the shock of a loved one’s death, court documents say, families relied on Craffy for advice.

But in a secret third job he did not disclose to families or the Army, Craffy illegally held outside “employment with two separate financial investment firms.”

Though he was “prohibited from offering any personal opinions regarding the surviving beneficiary’s benefits decisions,” the Department of Justice said in a release, Craffy “admitted to encouraging the Gold Star families to invest their survivor benefits in investment accounts that he managed in his outside, private employment.”

The “vast majority” of those families, the DOJ said, believed that, because of Craffy’s role, the firms were endorsed by or even directly related to the Army.

Craffy pleaded guilty before U.S. District Judge Georgette Castner in Trenton federal court to the indictment filed against him, which charged six counts of wire fraud and one count each of securities fraud, making false statements in a loan application, committing acts affecting a personal financial interest, and making false statements to a federal agency.

Cash benefits when a servicemember dies

When a member of the Armed Services dies on active duty, their beneficiary is entitled to a $100,000 “Death Gratuity” and servicemember’s life insurance of up to $400,000. The military provides several services to the servicemember’s family, including the assistance of a financial counselor. In this role, prosecutors say, from May 2018 to November 2022, Craffy obtained nearly $10 million from families for accounts managed by Craffy in his private capacity. Once in control of this money, Craffy executed trades — often without the family’s authorization — that earned high commissions. During the timeframe of the scheme, the Gold Star family accounts lost more than $3.7 million, while Craffy personally earned more than $1.4 million in commissions, drawn from the family accounts.

The wire fraud and securities fraud charges are each punishable by a maximum of 20 years in prison. The charge of submitting a false statement on a loan application is punishable by a maximum of two years in prison. The charges of acts affecting a personal interest and false statements to a federal agent are each punishable by five years in prison. All counts but the securities fraud count are also punishable by a maximum fine of either $250,000 or twice the gain or loss from the offense, whichever is greatest. The securities fraud count is punishable by a maximum fine of either $5 million or twice the gain or loss from the offense, whichever is greatest. Sentencing is scheduled for Aug. 21, 2024.

The U.S. Securities and Exchange Commission (SEC) has a pending civil complaint against Craffy based on the same and additional conduct.

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