SEC Charges Former Army Financial Counselor for Defrauding Gold Star Families

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.

Coinbase Knew It May Have Been Violating the Law Prior to the SEC’s Lawsuit, Regulator Claims

Coinbase’s own public filings also note that one potential risk to Coinbase investors include the fact that listed assets might be considered securities.

“These actions clearly show that Coinbase understood that the securities laws could apply to its conduct and knew which rules to consider in evaluating the legality of its conduct, but nevertheless made the calculated decision to take on this risk in the name of growing its business,” the filing said.

The SEC also previewed its arguments pushing back against Coinbase’s proposed motion for judgement, saying the crypto exchange made two “equally flawed arguments.”

Twitter Sues Law Firm Over $90 Million Payment in Elon Musk Deal

According to documents submitted with Friday’s lawsuit, Twitter’s board and executives approved the $90 million payment because Wachtell Lipton and one of its lawyers, William Savitt, had succeeded in making Mr. Musk abide by his agreement to buy the company.

By approving the payment, Twitter’s former executives and board breached their fiduciary duty, the lawsuit said. Twitter’s board rushed to close the deal with Mr. Musk and did not act “prudently” or “on an informed basis,” the lawsuit said.

Wachtell Lipton was wired the bulk of the $90 million fee a mere 10 minutes before the deal closed in October, the lawsuit said. Within minutes of Wachtell Lipton’s receiving that transfer, Mr. Musk fired some of Twitter’s top executives, including its chief legal officer and general counsel, according to the suit.

Statement Regarding Amicus Brief Filing in Murray v. UBS Securities, LLC

In our view, the Commission’s process for deciding whether to join the Solicitor General’s amicus brief did not facilitate full and careful consideration of the recommendation. Some context should be provided. At the same time the Commission was asked to review the amicus brief, the Commissioners were asked to consider and provide feedback on two major rulemakings that will be considered at an open meeting to be held on July 12, 2023, which is one week from the date that the amicus brief was filed.

…. Together, these rulemakings amount to more than 500 pages. In the case of the money market fund reforms, Commissioners have the obligation to consider public comments on the proposal, a process that is complicated by the highly technical and complex aspects of the matter being considered.

A robust deliberative process is an essential component of proper agency action. Because the Commission has limited resources, it can engage in only so many robust deliberative processes at one time. Therefore, the Commission cannot pursue every item on its wish list all at once, but instead it must prioritize. It is not clear to us that such prioritization is taking place.

Binance and BNB Feel Strain of World’s Regulators Leaping Into Action

Australian officials directly sought out current and former employees of Binance’s operation there this week, demanding copies of internal communications and data from their personal devices, according to a person familiar with the government’s move against the leading crypto exchange, which marked the latest in a pile-up of legal troubles facing the company.

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From weighty accusations by U.S. regulators, to a French raid, to a denial of licensing by the Dutch, to this probe in Australia, Binance is facing legal headwinds in many parts of the world, while its CEO is denying that a spate of departures of key legal and compliance executives is cause for concern.

Crypto pledged to dethrone Wall Street. It’s getting swallowed instead

The cryptocurrency industry built a cultlike fan base in the United States by promising to break Wall Street and Washington’s joint grip on the financial system. But as the sector weathers a steep decline and faces tough new scrutiny from the SEC, some of Wall Street’s biggest names are trying to enfold it.

The developments place the industry at a crossroads in the United States. Popular interest in crypto has cratered after a year of spectacular meltdowns left a trail of bankrupt crypto companies, criminally charged entrepreneurs, shamed celebrity endorsers and ravaged investors. With the hype deflated, financial giants sense an opportunity for profit by offering their customers a pared-back menu of crypto products and services unlikely to raise hackles from regulators.

ESG Enforcement Emerges as Risk for Oil Firms, Bitcoin Miners

An SEC enforcement initiative targeting misleading ESG disclosures has become a business risk for dozen of public companies, including bankrupt Bitcoin miner Core Scientific, shale oil producer Pioneer Natural Resources and banking giant Ally.

The Climate and ESG Task Force the Securities and Exchange Commission, which was launched two years ago, was mentioned among the risk factors in 30 companies’ 10-K annual reports so far this year with about six months to go, according to a Bloomberg Law review of company filings. That’s double the 15 companies that referenced it in their 10-K risk factors in all of 2022.

Disney, Fiduciary Duties, Business Judgment, and Corporate ESG-Related Actions

As I have noted in prior posts, conflicting political views about ESG-related issues have put corporate executives in the crosshairs, a dilemma that has caused some companies to try to avoid ESG issues altogether – a phenomenon that has been described as “greenhushing.” Among other concerns troubling corporate officials about the entire ESG debate is that some politicians have publicly raised the possibility that the act of taking ESG considerations into account in decision-making could itself constitute a breach of fiduciary duty.

A Disney shareholder has raised that very question concerning the company’s board and its public opposition to the Florida “Don’t Say Gay” legislation….