Lord Voldemort on Wall Street: When DOJ, SEC and FINRA Will Not Name Names

July 10, 2023

DOJ filed an Indictment and published this Press Release:"U.S. Army Financial Counselor Charged with Defrauding Gold Star Families." SEC filed a Complaint and published this Press Release: "SEC Charges Former Army Financial Counselor Who Defrauded Gold Star Family Members." And yet, despite all of that, neither DOJ nor the SEC will name the name of the financial counselor's employer in the Indictment, Complaint, or two Press Releases. Making matters even more ridiculous, FINRA expelled the counselor and barred the counselor's brokerage firm; however, FINRA will not name the employee's name in its AWC settlement expelling the firm or in its Press Release publicizing that expulsion. 
Gold Star Families Victimized by Financial Counselor

U.S. Army Financial Counselor Charged with Defrauding Gold Star Families (DOJ Release)

In the United States District Court for the District of New Jersey, an Indictment was filed charging former U.S. Army financial counselor Caz Craffy a/k/a "Carz Craffey"
https://www.justice.gov/media/1304436/dl?inline with six counts of wire fraud, one count of securities fraud,  one count of false statement on loan application, one count of acts affecting personal financial interest, one count of false statements. As alleged in part in the DOJ Release:

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.

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. 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.

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

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. Once in control of this money, Craffy repeatedly executed trades, often 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 $3.4 million, while Craffy personally earned more than $1.4 million in commissions, drawn from the family accounts.

SEC Charges Former Army Financial Counselor Who Defrauded Gold Star Family Members (SEC Release)
In the United States District Court for the District of New Jersey, the SEC filed a Complaint charging former U.S. Army financial counselor Caz L. Craffy with violating the antifraud provisions of the federal securities laws and Regulation Best Interest
https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-127.pdf. As alleged in part in the SEC Complaint, Craffy:

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 DOJ and SEC Press Releases speak of "financial counselor"  Craffy but from what  brokerage firm?
DOJ: Financial Firm-2
I reviewed the 23-page Indictment which comprises 10 criminal counts and came upon this obfuscation on page 2 of the Indictment:
d. Financial Firm-2 was a broker-dealer and financial planning firm headquartered in Point Pleasant Beach, New Jersey. From in or around April 2021  through in or around November 2022, CRAFFY worked for Financial Firm-2 as a financial professional registered with FINRA. . . .
SEC: Brokerage Firm B
I reviewed the 42-page SEC Complaint, which comprises 187 enumerated paragraphs and came upon this obfuscation page 5 of the SEC Complaint:

13. Craffy, age 40, resides in Colts Neck, New Jersey. Craffy has been a member of the United States Army Reserves since at least 2003 and is currently a Major. From November 2017 until January 2023, Craffy was employed full-time as a Financial Counselor at the U.S. Army’s Fort Dix Survivor Outreach Services program. Craffy has been associated with five broker-dealer firms from 2011 until November 2022, and has held Series 7 and 63 securities licenses. On December 8, 2022, the Financial Industry Regulatory Authority (“FINRA”), a self-regulatory organization that oversees U.S. broker-dealers, barred Craffy from associating with any FINRA member in all capacities, including as a broker, because he failed to provide information and testimony as required under FINRA rules.

14. Brokerage Firm A is a Virginia corporation with its principal place of business in Boca Raton, Florida. Brokerage Firm A registered with the SEC as a broker-dealer in July 2000. Craffy was associated with Brokerage Firm A as a fulltime registered representative from May 2017 through March 2021.

15. Brokerage Firm B is a New Jersey limited liability company with its principal place of business in Point Pleasant Beach, New Jersey. Brokerage Firm B registered with the SEC as a broker-dealer in July 2018. Craffy was associated with Brokerage Firm B as a registered representative from April 2021 through November 2022. Brokerage Firm B terminated Craffy in mid-November 2022. Brokerage Firm B then took over the servicing of his customers’ accounts. 
For those of you unfamiliar with the victims upon whom Craffy purportedly preyed as alleged in the SEC Complaint, let me offer this reference from that pleading:
16. Gold Star families are the survivors and loved ones of U.S. military service members who died during active duty service, regardless of cause. Certain Gold Star family members receive survivor benefits, including death benefits and
insurance payments, as a result of their loved one’s death.

17. Because Gold Star families have experienced traumatic losses and may be relatively financially unsophisticated, the U.S military provides them with Financial Counselors to furnish guidance and assistance concerning their survivor benefits.
2022: FINRA Bars Craffy
Mindful of the SEC Complaint's reference in Paragraph 13 to FINRA's December 2022 Bar of Craffy, I went onto FINRA's database and found: In the Matter of Caz Craffy, Respondent (FINRA AWC 2022074969501 / December 8, 2022)
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Caz Craffy submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Caz Craffy was first registered in 2011, and by April 26, 2021, he was registered with Monmouth Capital Management LLC
The Craffy AWC asserts under the heading "Overview":
Respondent refused to produce information and documents in response to a FINRA Rule 8210 request and refused to appear for on-the-record testimony in response to a separate FINRA Rule 8210 request. Therefore, Respondent violated FINRA Rules 8210 and 2010. 
Eureka!!! Finally, we have the name of a FINRA brokerage firm with which Craffy was registered! In accordance with the terms of the AWC, FINRA imposed upon Craffy a Bar from associating with any FINRA member in all capacities.
FINRA Press Release: Monmouth Capital Management Expelled
Doing a bit more research, I found that in addition to publishing the 2022 Craffy AWC, over a year later, FINRA published: "FINRA Expels Monmouth Capital Management / Firm Violated Reg BI, Excessively Traded, and Churned Numerous Customer Accounts, Including Those of Gold Star Families" (FINRA News Release / July 7, 2023)
https://www.finra.org/media-center/newsreleases/2023/finra-expels-monmouth-capital-management I reported about the underlying Monmouth AWC in the "Securities Industry Commentator" as follows:

FINRA Expels Monmouth Capital Management LLC
In the Matter of Monmouth Capital Management LLC, Respondent (FINRA AWC 2022076459303)
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue Monmouth Capital Management LLC submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Monmouth Capital Management LLC has been a FINRA member firm since 2018 with under 10 registered representatives at one branch. In accordance with the terms of the AWC, FINRA expelled Monmouth Capital Management LLC from membership. The AWC discloses in part in the "Overview" section that [Ed: footnotes omitted]:

From August 1, 2020, through February 28, 2023, Monmouth, acting through six registered representatives, excessively traded 110 customer accounts, of which 42 were also churned, causing the customers to incur $3,953,492 in total trading costs. The trading in the 110 customer accounts resulted in annualized cost-to-equity ratios ranging from 21.75% to 128.5%, and annualized turnover rates ranging from 6.05 to 35.24, and each of the accounts suffered substantial losses. As a result, Monmouth willfully violated the Care Obligation of Regulation Best Interest, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5, and also violated FINRA Rules 2020 and 2010.
From August 1, 2020, through the present, Monmouth also failed to establish, maintain, and enforce a supervisory system and written supervisory procedures (WSPs) reasonably designed to achieve compliance with the Exchange Act and FINRA rules relating to excessive trading and churning. In July 2020, Monmouth represented to FINRA that it had improved its supervisory system, including revising its WSPs to provide specific actions to take to monitor for, and address, red flags of excessive trading and churning. Monmouth’s representations to FINRA were inaccurate. Until at least December 2022, the firm’s supervisors failed to take any of the promised remedial steps, including reviewing monthly active account exception reports and sending active account letters to customers. As a result, Monmouth willfully violated Reg BI’s Compliance Obligation and violated FINRA Rules 3110 and 2010.
Additionally, between November 9, 2020, and February 28, 2023, Monmouth provided false and misleading disclosures on its client relationship summary (Form CRS) concerning the scope of its account monitoring services and the nature of certain trading costs it charged to customers. These misrepresentations included a statement that Monmouth would monitor customer accounts utilizing daily exception reports, but the firm did not in fact utilize these reports. As a result, Monmouth willfully violated Section 17(a)(1) of the Exchange Act and Exchange Act Rule 17a-14 and also violated FINRA Rule 2010.
During this same period, Monmouth also failed to have a reasonable supervisory system, including WSPs, to ensure that its customer disclosures on Form CRS were not false or misleading. As a result, Monmouth violated FINRA Rules 3110 and 2010.
Bill Singer's Comment
In 2022, FINRA barred Craffy. In 2023, FINRA expelled Monmouth -- and published both a News Release and the AWC to that effect. Yet, oddly, there is no mention of Craffy's name in either the Monmouth AWC or the FINRA Press Release. 
After filing an Indictment against Craffy, DOJ published: "U.S. Army Financial Counselor Charged with Defrauding Gold Star Families."  Monmouth's name is never named.
After filing a Complaint against Craffy, SEC published: "SEC Charges Former Army Financial Counselor Who Defrauded Gold Star Family Members." Monmouth's name is never named.
Neither DOJ nor the SEC names the name of Craffy's employer in the Indictment, Complaint, or two Press Releases; and FINRA will not name the name of Craffy in its AWC expelling Monmouth or in its New Release about that expulsion. In the DOJ Indictment, the obfuscation is "Financial Firm-2." In the SEC Complaint, the obfuscation is "Brokerage Firm B." We are left to ponder a pregnant sentence from the FINRA News Release: "This matter originated from a customer complaint made to FINRA concerning a former Monmouth registered representative."
Are we dealing with Lord Voldemort? Is Craffy he who must not be named? Is Monmouth the firm that must not be named?
Is this an effective way to regulate Wall Street? 

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