Former Army financial counselor guilty of ripping off Gold Star families

Caz Craffy, former financial adviser in the Army, pleaded guilty last week to scamming grieving Gold Star families out of millions through a series of insurance fraud schemes.

According a plea bargain he accepted, Craffy, 41, pleaded guilty to 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.

Craffy convinced victims to fraudulently invest in life insurance, committed mail fraud and lied on forms, court documents say.

Craffy faces a maximum penalty of of 20 years in prison for each count of wire fraud and securities fraud, a maximum penalty of of two years in prison for submitting a false statement on a loan application, and a maximum penalty of five years in prison for the charges of acts affecting a personal interest and false statements to a federal agent.

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. A sentencing hearing is scheduled for Aug. 21.

“Caz Craffy admitted today that he brazenly took advantage of his role as an Army financial counselor to prey upon families of our fallen service members, at their most vulnerable moment, using lies and deception," said U.S. Attorney Philip R. Sellinger. "These Gold Star families have laid the dearest sacrifice on the altar of freedom. And they deserve our utmost respect and compassion, as well as some small measure of financial security from a grateful nation."

Craffy, of Colts Neck, N.J., was set to go on trial this week. He faces similar charges in a complaint filed by the Securities and Exchange Commission.

According to plea documents, Craffy said he is taking about a dozen medications for anxiety, depression and other ailments.

An extensive fraud

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, the U.S. Attorney's office said in a news release. He was also a major in the U.S. Army Reserves, where he has been enlisted since 2003.

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, the release said. 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.

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.

Craffy used his position as an Army financial counselor to identify and target Gold Star families and other military families, the government alleges. He encouraged the Gold Star families to invest their survivor benefits in investment accounts that he managed in his outside, private employment.

Millions at stake

Based upon Craffy’s false representations and omissions, the vast majority of the Gold Star families mistakenly believed that Craffy’s management of their money was done on behalf of and with the Army’s authorization, court documents say.

From May 2018 to November 2022, Craffy obtained more than $9.9 million from Gold Star families to invest in accounts managed by Craffy in his private capacity, court documents say. Once in control of this money, Craffy repeatedly executed trades, often allegedly without the family’s authorization.

These unauthorized trades earned Craffy high commissions. During the timeframe of the alleged scheme, the Gold Star family accounts had lost more than $3.7 million, the government said, while Craffy personally earned more than $1.4 million in commissions, drawn from the family accounts.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.