Welcome Guest
Log In | Register )
You last visited September 18, 2021, 8:37 am
All times shown are
Eastern Time (GMT-5:00)

Massachusetts father and sons accused of defrauding Lottery of $21 million

Aug 25, 2021, 11:00 am

Share this news story on Facebook
Tweet this news story on Twitter
Massachusetts LotteryMassachusetts Lottery: Massachusetts father and sons accused of defrauding Lottery of $21 millionRating:

"Statistically improbable" number of wins raises red flags

By Kate Northrop

A Massachusetts family is accused of defrauding the Massachusetts Lottery of nearly $21 million in a tax evasion scheme that took place over the past decade.

It wouldn't be farfetched to say that cashing in more than 13,000 winning lottery tickets worth almost $21 million over eight years would be statistically impossible, if not improbable. This many wins could not simply be attributed to sheer luck.

"A statistician will say that there's some astronomical odd," Lottery Executive Director Michael Sweeney told the New York Times. "But the reality is, it's zero."

Ali Jaafar, 63, and his sons Mohamed Jaafar, 31, and Yousef Jaafar, 28, conducted a ticket-cashing scheme commonly referred to as "ten-percenting," where scammers will buy winning lottery tickets from players for cash at a discount between 10-20% of the ticket's value. This means that players who originally held the tickets would not have to report the winnings on their tax returns or pay owed child support. The fraudsters then present the winning tickets to the Lottery as their own, claim the prize for themselves, and report the winnings on their tax returns such that they would be offset by alleged gambling losses, thus avoiding federal income taxes.

Between 2011 and 2019, Ali only paid $24,500 in federal taxes on the $15 million in lottery winnings he reported. On top of that, he received $886,261 back from the federal government in refunds.

The suspicions of fraudulent activity did not suddenly come out of nowhere. In 2019, Ali was named the "top individual lottery ticket casher," Mohamed ranked third, and Yousef ranked fourth. Combined, their winnings that year alone totaled $5.8 million. The Massachusetts State Lottery Commission had their eye on the Jaafar's since then and even suspended them from cashing in tickets.

In retaliation, the family brazenly sued the Lottery.

"I think it really speaks to a level of hubris," Sweeney said in an interview. "This is not the result of somebody who's lucky or somebody who is, quote-unquote, playing a lot."

In 2018, the Lottery introduced a policy that took aim at players who won with a frequency deemed "factually or statistically improbable." It allows the Lottery to freeze payouts for 90 days for anyone who claims at least 20 prizes valued at $1,000 or more in a year.

"If you're in violation of this policy, you should have the expectation that you will have a hearing and a potential suspension regarding this matter," Sweeney told WBUR.

The Jaafar family's prize claims were, without a doubt, factually impossible to the highest degree. State prosecutors said that Ali "would have had to purchase 12,411 tickets per day (each and every day), which equates to purchasing 517 tickets per hour and more than 8 tickets per minute," to account for the 569 winning scratch-off tickets he claimed for prize money over six months. The fact that the tickets were purchased "from Lowell to Nantucket, and Boston to Worcester" further drove the point home.

The Jaafars' claim was dismissed last year, and on Monday, they were collectively charged with over a dozen counts of fraud, money laundering, and tax evasion.

According to the United States Department of Justice, one count of conspiracy to defraud the IRS comes with a maximum sentence of five years in prison, one count of money laundering has a 20-year maximum sentence, and one count of filing false tax returns provides for a maximum of three years. The accused also face additional supervised release, fines, and restitution for each count.

Lottery Post Staff

We'd love to see your comments here!  Register for a FREE membership — it takes just a few moments — and you'll be able to post comments here and on any of our forums. If you're already a member, you can Log In to post a comment.

21 comments. Last comment 21 days ago by KY Floyd.
Page 1 of 2
Tony Numbers's avatar - Lottery-022.jpg
Bronx ny
United States
Member #158510
August 25, 2014
755 Posts
Offline

Didn't they know only the lottery has permission to steal via the taxes!

    Stat$talker's avatar - animated sphere.gif
    700 light yrs West of Milky Way Galaxy's Center
    United States
    Member #200642
    September 1, 2019
    1493 Posts
    Offline

    I've long said the State Lottery's Motto iz... "We can Screw YOU,.. but nnaahh, YOU can't Screw US.!"

    Now the real question iz.. Why aren't the Fedz investigating these cRoOkEd Lotteries with 15 min to 1 hr cutoff time before the actual Drawing?

    Hell, I've got STATISTICAL data that clearly says what's happenin here in Ga is suspicious..!!.. but noticed how LOs relied on Probability & Statistics in support of their claim of suspicion...Huuummm.. They know that "Math doesn't lie"..

    ...MATH... The final Stochastic frontier...

    These are the Lottery Voyages of Stat$talker..!!

    The ongoing Mission,..to seek out the Laws of "Probability Math"...

     to master its rules to invoke...to Conquer ALL Major Jackpots..!!

    ...To boldly go,... Where NO Player has gone before...!!

      Avatar
      Gallatin Tennesee
      United States
      Member #194096
      November 29, 2018
      82 Posts
      Offline

      These guys started doing this in 2011, the authorities didn't figure it out until 2019. If these knuckleheads had not been so greedy they could have shut everything down in 2017 and kept all the money they had collected. Apparently there were a lot of customers who owed child support or who wanted to avoid taxes. You buy a scratch off and win $50,000......but instead going to Lottery Headquarters, you sell the ticket to Ali or one of his sons for $35,000 or maybe $40,000, you never have to notify the IRS and Ali and his sons collect thousands of dollars a week depending on how many winners show up at their store. When you are engaged in something like this you have to always remember......the postman always rings twice.

      Thinking of...Mail For You

        Avatar

        United States
        Member #149388
        November 30, 2013
        75 Posts
        Offline

        Yeah not sure what is sadder: the fact they did it or the fact the lottery allowed it to happen

          Avatar
          Kentucky
          United States
          Member #32651
          February 14, 2006
          9229 Posts
          Offline

          "conducted a ticket-cashing scheme commonly referred to as "ten-percenting

          The lottery was cashing their tickets over $5000 and withholding 25% for taxes. 

          "Ali only paid $24,500 in federal taxes on the $15 million in lottery winnings he reported.

          But the 25% withheld for taxes is $3,750,000. Where did that money go?

          And why would anyone think they actually bought that many tickets? 

          Oh and how is any of that defrauding the lottery?

          It's not my fault! I voted for Amy.

            TheGameGrl's avatar - Lottery-012.jpg
            A long and winding road
            United States
            Member #17083
            June 10, 2005
            6608 Posts
            Offline

            So to summarize the states' position. We have proof that you the player will always lose more then win. 

            To the players: it's your dollar. Spend it or save it how you wish. 

            Were the accused ?: store owners /retail licensed for the lottery? 

            I could understand if they were retailers then they violated the contract rule. 

             

            If the guys were avg Joe's willing to take a hit, then that is open to question. Clearly they 'claimed' the values on the tax. They didn't hide the values. So where's the problem?

            Count your smiles.

              Avatar
              * In hot pursuit of $ *
              White Shores- California
              United States
              Member #136471
              December 12, 2012
              6719 Posts
              Offline
              • This is one of many stories that LP has run in the past & at least we seeing the light at the end of the Jaafer tunnel. I am looking forward to finding out the following:
              • The " lead hand" lottery winner from Canada that supposedly gipped his colleagues out of millions.
              • The teenage son that bought a scratcher for his Dad sitting out in the car worth $5 mil only to be denied the winnings since the lottery said he was under 18 at the time.

               * Voice of Reason *   

              * The Truth Hurts *

              People who say it cannot be done should not interrupt those who are doing it- George Bernard Shaw.

                Avatar
                Maryland
                United States
                Member #155447
                May 19, 2014
                34 Posts
                Offline

                They withheld the taxes but the Jaffars filed their tax returns showing deductions for gambling losses and ended up getting refunds. The part about the refunds is in the story.

                  Gambler4Life's avatar - Lottery-011.jpg
                  Texas
                  United States
                  Member #151475
                  January 18, 2014
                  59 Posts
                  Offline

                  Hahaha!! Right you are!!!

                    Tony Numbers's avatar - Lottery-022.jpg
                    Bronx ny
                    United States
                    Member #158510
                    August 25, 2014
                    755 Posts
                    Offline

                    So they assumed the tax obligation of the actual winner. In turn for a reduced payment to the actual winner as a fee for the service. So the actual winner has no tax liability. How dare the lottery use the argument that no one could be winning that much. If someone doesn't want to pay the tax they should be allowed to let someone else cash for them.

                      Avatar
                      NY
                      United States
                      Member #23834
                      October 16, 2005
                      4444 Posts
                      Offline

                      "But the 25% withheld for taxes is $3,750,000. Where did that money go?"

                      The IRS withholding only applies to wins of more than $5000, so in theory you could claim prizes totaling a billion dollars and not have a dime in federal withholdings. Presumably the majority of the money was won  from prizes big enough to be reported but below the $5000 threshold that triggers federal withholdings.

                      "how is any of that defrauding the lottery?"

                      None of that defrauds the lottery, and they certainly didn't defraud the MA lottery of $21 million by claiming a bunch of prizes that were (presumably) legitimate. The fraud kicks in when you sign the claim form and claim that you're not helping anyone avoid their financial obligations. If the original ticket owner owed child support or other monies that would have been withheld then cashing a ticket for them is definitely helping them avoid their financial obligations. It's also helping the m avoid their tax obligations if thye get any proceeds from the ticket and don't claim it as taxable income.

                      "Clearly they 'claimed' the values on the tax."

                      I know it's incredibly confusing, but reporting the full value of the prize and then claiming fraudulent losses to avoid paying taxes on the full value of the prize isn't legal.

                        grwurston's avatar - Lottery-062.jpg
                        Same #'s, different games.
                        Here
                        United States
                        Member #90247
                        April 24, 2010
                        10527 Posts
                        Offline

                        Breaking it down.

                        13,000 tix/8 years= 1,625 tix per year.

                        1,625 tix/52 weeks= 31.25 tix per week.

                        31.25 tix/7 days= 4.46 tix per day.

                        The lottery is the same. 

                        https://youtu.be/b5-iJUuPWis

                          Stat$talker's avatar - animated sphere.gif
                          700 light yrs West of Milky Way Galaxy's Center
                          United States
                          Member #200642
                          September 1, 2019
                          1493 Posts
                          Offline

                          Breaking it down.

                          13,000 tix/8 years= 1,625 tix per year.

                          1,625 tix/52 weeks= 31.25 tix per week.

                          31.25 tix/7 days= 4.46 tix per day.

                          I think maybe the bulk of the suspicious winning tickets, came into Lottery Headquarters over the norm in a crowded period of time...That, maybe was the "Red Flag" trigger....

                          But in the way You just laid it out.. It doesn't immediately draw attention...

                          ...MATH... The final Stochastic frontier...

                          These are the Lottery Voyages of Stat$talker..!!

                          The ongoing Mission,..to seek out the Laws of "Probability Math"...

                           to master its rules to invoke...to Conquer ALL Major Jackpots..!!

                          ...To boldly go,... Where NO Player has gone before...!!

                            GiveFive's avatar - Lottery-026.jpg
                            Florida - West Coast
                            United States
                            Member #92605
                            June 10, 2010
                            5184 Posts
                            Offline

                            "But the 25% withheld for taxes is $3,750,000. Where did that money go?"

                            The IRS withholding only applies to wins of more than $5000, so in theory you could claim prizes totaling a billion dollars and not have a dime in federal withholdings. Presumably the majority of the money was won  from prizes big enough to be reported but below the $5000 threshold that triggers federal withholdings.

                            "how is any of that defrauding the lottery?"

                            None of that defrauds the lottery, and they certainly didn't defraud the MA lottery of $21 million by claiming a bunch of prizes that were (presumably) legitimate. The fraud kicks in when you sign the claim form and claim that you're not helping anyone avoid their financial obligations. If the original ticket owner owed child support or other monies that would have been withheld then cashing a ticket for them is definitely helping them avoid their financial obligations. It's also helping the m avoid their tax obligations if thye get any proceeds from the ticket and don't claim it as taxable income.

                            "Clearly they 'claimed' the values on the tax."

                            I know it's incredibly confusing, but reporting the full value of the prize and then claiming fraudulent losses to avoid paying taxes on the full value of the prize isn't legal.

                            It's "incredibly confusing" is correct.

                            What the article does not specify is exactly who the plaintiff's are.  The charges are federal charges brought by a federal prosecutor - a US Attorney. The charges are "over a dozen counts of fraud, money laundering, and tax evasion.

                            According to the United States Department of Justice, one count of conspiracy to defraud the IRS comes with a maximum sentence of five years in prison, one count of money laundering has a 20-year maximum sentence, and one count of filing false tax returns provides for a maximum of three years."

                            The federal government will prosecute these guys in a US District Court on behalf of both plaintiffs - The Commonwealth of Massachusetts and The United States of America. G5

                            Players who've won large lottery jackpots have something in common. Many of them say "I've played the lottery for years, but I never won anything but small prizes."   That's normal or typical, but it's also why you should not get discouraged and stop playing.  Who knows?  Maybe someday you'll say "I've played the lottery for years...."