Gold Star Families Lose $5M Death Benefits In NJ Man's Scheme: US Attorney

TRENTON, N.J. – A civilian U.S. Army financial counselor from Colts Neck has been indicted on 10 counts in connection with a fraud scheme that cost two dozen Gold Star families more than $3.4 million in death benefit funds, U.S. Attorney Philip R. Sellinger announced Friday.

Caz Craffy, also known as “Carz Craffey,” 41, of Colts Neck, was indicted on six counts of wire fraud, and one count each of securities fraud, making false statements in a loan application, committing acts furthering a personal financial interest, and making false statements to a federal agency, Sellinger's office said.

Craffy, who is a civilian U.S. Army financial counselor at Joint Base McGuire-Dix-Lakehurst and a major in the U.S. Army Reserves, was expected to make his initial appearance Friday before U.S. Magistrate Judge Tonianne J. Bongiovanni at the Trenton Federal Courthouse.

From May 2018 to November 2022, Craffy used his position as a financial counselor for the Army to get "more than $9.9 million from Gold Star families to invest in accounts managed by Craffy in his private capacity, authorities allege, losing $3.4 million, while gaining $1.4 million in commissions," according to government documents in the case.

“Stealing from Gold Star families whose loved ones made the ultimate sacrifice in service to our nation is a shameful crime,” U.S. Attorney General Merrick B. Garland said. “As alleged in the indictment, the defendant in this case used his position as an Army financial counselor to defraud Gold Star families, steal their money, and enrich himself."

"Predatory conduct that targets the families of fallen American service members will be met with the full force of the Justice Department," Garland said.

And Sellinger added: “The families of our fallen service members have laid the dearest sacrifice on the altar of freedom. These Gold Star families deserve our utmost respect and compassion, as well as some small measure of financial security from a grateful nation. They must be off-limits for fraudsters."

Sellinger said Craffy "took advantage of his role as an Army financial counselor to prey upon these families, using lies and deception to steer their investments in a way that would make him money."

According to his LinkedIn account, Craffy is "An investment executive with 22 years in the financial sector. Specializing in maximizing a client's earning potential while minimizing risks and hedging all aspects of their portfolio with a variety of products. In addition, major in the U.S. Army with over 19 years of experience and an Iraq combat veteran."

But according to documents in the case, Craffy used his position as an Army financial counselor to identify and target Gold Star families and other military families, the government alleges.

From November 2017 to January 2023, Craffy was a civilian employee of the U.S. Army, working as a financial counselor with the Casualty Assistance Office. He was also a major in the U.S. Army Reserves, where he has been enlisted since 2003.

When a member of the Armed Services dies during active duty, his or her surviving beneficiary, now a member of a Gold Star family, is entitled to a $100,000 death gratuity and the soldier’s life insurance of up to $400,000.

These payments are disbursed to the beneficiary in a matter of weeks or months following the servicemember’s death. To assist the beneficiaries in this time of need, the military provides a number of services to the servicemember’s family, including the assistance of a financial counselor.

As a financial counselor at Joint Base McGuire-Dix-Lakehurst, Craffy was responsible for providing general financial education to the surviving beneficiaries. He was prohibited from offering any personal opinions regarding the surviving beneficiary’s benefits decisions.

Craffy was not permitted to participate personally in any government matter in which he had an outside financial interest. However, without telling the Army, Craffy simultaneously maintained outside employment with two separate financial investment firms, Sellinger's office said.

He encouraged the Gold Star families to invest their survivor benefits in investment accounts that he managed in those two firms. Once in control of this money, Craffy repeatedly executed trades, often without the families' authorization, the government says.

The scheme cost the Gold Star family accounts more than $3.4 million, while Craffy personally earned more than $1.4 million in commissions, drawn from the family accounts, Sellinger's office said.

U.S. Attorney Sellinger comments on charges

In a separate statement, Sellinger said that, as alleged, Craffy "used his position to access military databases, identify servicemember families who recently lost a loved one, and contact them directly.

"Leveraging his relationships with these families, Craffy induced them to invest the survivor benefits with these firms."

Sellinger said he "didn’t tell them that the Army was not affiliated with and did not endorse these firms. Caffy also didn’t tell them that he personally would earn commissions from each trade executed by these firms — that he would make money from them. Nor did he tell them that the commissions would be paid out of the money the Gold Star families invested."

Sellinger said he didn't disclose this to clients "because it was prohibited. As a financial advisor registered with the Financial Industry Regulatory Authority, Craffy had a duty to act in the best interests of the people he advised. As an Army employee, Craffy was forbidden from giving advice that affected his own financial interests."

He said Craffy's "misrepresentation and omissions to induce the Gold Star families to invest with him was just the first part of his fraud scheme. Despite often receiving instructions to invest the survivor benefits conservatively, Craffy induced the victim families to sign pre-filled out account opening documents that falsely indicated that they wanted an 'aggressive' investment strategy."

Sellinger cited, as an example, how "Craffy induced a widow of a service member to sign pre-filled account documents with his financial firm. These documents contained several statements that Craffy knew were false, including that the widow had a net worth of over a million dollars, that she had an 'aggressive' risk tolerance and wanted 'maximum growth' with 'higher risk,' and that she had over five years of investment experience," Sellinger said.

"All these claims were false, and Craffy knew it. But Craffy induced the victims into signing these forms because they bought him leeway to make trading decisions for the families with little oversight from the financial firms," Sellinger said.

Also, as alleged in the indictment, Craffy "routinely failed to get the families' authorization before causing these trades, despite the financial firms’ policies requiring such approval."

Craffy's trades caused "significant losses to these Gold Star Families. When they questioned him about their holdings though, Craffy told them not to check their account statements. Or he provided excuses for why their holdings weren’t doing well," Sellinger said.

"But no matter how the families’ investments ultimately did, Craffy earned lucrative commissions just by executing the trades. For him, each trade was a double-sided coin — he won no matter how the trades came out – heads or tails - because he got paid either way," Sellinger said.

"Through his fraud scheme, Craffy caused approximately 29 individuals to transfer a total of approximately $9.9 million in survivor benefits to accounts he controlled at certain financial firms," he added.

The U.S. Securities and Exchange Commission also filed a civil complaint against Craffy Friday based on the same and additional conduct, the government said.

Craffy also has been permanently prohibited from association with any member of the Financial Industry Regulatory Authority Inc.

Sellinger continued: "There is no room for those who seek to rip off families of fallen servicemembers to make a buck. We will use every means at our disposal to ensure that those who defraud military families are held accountable.”

If convicted, Craffy faces the following potential penalties:

• 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.

The government is represented by Assistant U.S. Attorneys Martha K. Nye of the Criminal Division in Trenton, and Carolyn Silane of the Criminal Division in Newark.

Defense counsel is Mark Berman of Fair Lawn. His office, when contacted Friday, said it did not wish to comment on the matter.