Massachusetts State Lottery officials knew for years that a small group of gambling syndicates had virtually taken over a game called Cash WinFall — winning most of the prizes during high payoff periods — but did nothing about it until the local media began investigating, according to state Inspector General Gregory W. Sullivan.
Sullivan's report details the way a handful of math and science wizards, including Massachusetts Institute of Technology undergraduates looking for an interesting school project, turned Cash WinFall into a nearly fulltime business, spending $40 million on tickets over a seven-year period and winning an estimated $48 million.
And lottery officials were happy about the huge sales to these sophisticated gamblers, bending and breaking lottery rules to allow them to buy hundreds of thousands of the $2 tickets, Sullivan found. If anything, lottery officials were envious, with one supervisor asking in an e-mail: "How do I become part of the club when I retire?"
State Treasurer Steven Grossman, who oversees the lottery, finally stopped the game this year. On Monday, Grossman said the agency should have taken action sooner.
"I feel it is important to essentially apologize to the public because a game was created that allowed syndicates to gain special opportunities that others did not have — using machines themselves, partnership with lottery agents, using them after hours. We're sorry some gained unfair advantage," said Grossman, who had requested Sullivan's investigation.
"Revenues were tremendous and the lottery benefited, but there were practices that were not appropriate and things done that were not rignt," he said.
However, the inspector general recommended no further action, concluding that lottery officials got no personal benefit from the syndicates' manipulations. He also found that ordinary gamblers still had a fair chance at winning Cash WinFall, though the syndicates reported a much higher rate of profit than ordinary gamblers.
Sullivan found that the lottery failed to manage the game or enforce the rules, but concluded the game was "a financial success for the lottery."
Local media reported last summer that a few gamblers with an extraordinary knowledge of math and probability had found a quirk in Cash WinFall shortly after it was introduced in 2004, allowing them to make an almost guaranteed profit as long as they purchased enough tickets at the right time. They figured out that, for a few days every three months or so, Cash WinFall became the most reliably lucrative lottery game in the country.
Sullivan said that these high rollers made a livelihood from playing it, giving up their day jobs to devote nearly full-time to the game, often backed by hundreds of thousands of dollars put up by investors.
The leaders of the group of MIT students stumbled on Cash WinFall as part of a college research project. James M. Harvey told investigators he was looking for an interesting senior independent study subject for his final semester in 2005. He said it took only a few days to determine that during so-called "rolldown weeks," it was easy for large-scale bettors to win more than they lose.
Here's why: Unlike most lottery games, the biggest prize in Cash WinFall was capped at $2 million. If no one won the jackpot when it reached $2 million, the jackpot was then redistributed — or "rolled down" — into the smaller prizes, making them 5 to 10 times bigger than normal. Matching 5 of the 6 numbers drawn in Cash WinFall would normally produce a $4,000 prize, but during a rolldown week, the prize could top $40,000.
The groups figured out that if they bought at least $600,000 worth of tickets, the chances were excellent that they would win back 15 percent to 20 percent more than they spent. As a result, whenever the Cash WinFall jackpot got close to $2 million, the syndicates rushed to stores to buy as many tickets as possible.
Harvey said he initially tried the game on a small scale during the Feb. 7, 2005, rolldown, winning $3,000 from $1,000 worth of tickets. The group's winnings inspired other betting pools on the MIT campus, the report said, but Harvey made it large-scale, forming a company with fellow student Yuran Lu. They called it Random Strategies Investments, after the dorm, Random Hall, where their plan was hatched.
Random Strategies officials spent many hours filling out betting slips and buying tickets at a few hand-picked stores, the report said, betting between $17 and $18 million over a seven-year period on Cash WinFall. Sullivan estimated the group earned at least $3.5 million in profits from 2005 to 2012, though Harvey declined to disclose his group's earnings.
Leaders of another group, GS Investment Strategies of Michigan, told investigators they typically aimed to buy around 312,000 tickets to ensure profits. On July 14, 2011, the group placed its largest bet ever, spending $720,000 on 360,000 tickets.
A third group, made up of scientists at Boston University and Northeastern University, started betting in 2005 after analyzing Cash WinFall and realized the odds were in favor of large-scale bettors.
"I told everyone I met: 'You should put more money into this game'," said Dr. Ying Zhang, who formed the Doctor Zhang Lottery Club Limited Partnership.
He told investigators the group made steady profits from Cash WinFall from the beginning, just as his calculations had suggested. In 2006, he left his day job as a biomedical researcher to focus mainly on Cash WinFall.
The game's vulnerability became clear in 2010, Sullivan said, when the MIT group figured out a way to win nearly the entire jackpot for a single drawing, something lottery officials had erroneously concluded was impossible.
The MIT group figured out that, if it bought enough tickets, it could push the jackpot to $2 million and trigger the rolldown all by itself.
In August 2010, the group began quietly buying up enough tickets to force a rolldown. The lottery remained silent as the MIT group stockpiled 700,000 tickets and did not alert the public that a rolldown week was about to happen, as it normally does. The MIT group bought more than 80 percent of the tickets during the August 2010 rolldown, Sullivan found, and ultimately cashed in 860 of 983 winning tickets of $600 or more.
Lottery officials previously said that they had no way of knowing what the MIT group was up to, but Sullivan concluded that was untrue. He found that the lottery knew the MIT group was buying up hundreds of thousands of tickets, because the lottery had to approve extra ticket sales for the stores the MIT group frequented.
The lottery's finance department, which approved the extra sales, failed to notify other lottery employees whose job was to predict jackpots for the public.
The inspector general faulted the lottery for not notifying the public, noting that the agency had been caught off-guard by the MIT group — even though the group had been preparing for a forced rolldown for years before it carried one out.
Sullivan concluded the lottery was aware of the gamblers' activities as far back as 2005 and cracked down only after officials feared negative publicity.
For instance, in April 2010, compliance officer John Marino visited the two Western Massachusetts stores where the Michigan group routinely spent hundreds of thousands of dollars during rolldowns — and found no problems.
"Everything is very organized and runs smoothly," wrote Marino, who mentioned that the owners of both stores were part of the Michigan betting club. The lottery even placed a second Cash WinFall machine at both Billy's Beverage of Sunderland and Jerry's Place in South Deerfield, allowing the gamblers to process more bets faster.
After local media reported on the syndicates' takeover of Cash WinFall last July, Grossman disciplined the owners of the two stores that had allowed the Michigan group to run the ticket machines themselves, and restricted the number of tickets any store could sell in a day, essentially ending the groups' dominance. The game was phased out earlier this year.
"I see this as a teachable moment, to send a message to our customers that the integrity of the lottery is of paramount importance," said Grossman.
Can't wait for the next Mass. exploitable game!!! All the lottery officials care about, are keeping their weekly sales of tickets in the black.
It's like a game of musical chairs, just wait a little time until some new lottery official comes along, with less than honorable scruples. Then history will
repeat itself all over again.
The politics of greed and corruption will never change, just whoever happens to be in charge at the time. 
It seems very doubtful to me that no lottery officials were in on the take on this one.
Especially when they knew exactly what was going on for years and even seemed to cooperate on not informing the public when a rolldown was happening.
Too coincidental, too convenient.
"Local media reported last summer that a few gamblers with an extraordinary knowledge of math and probability had found a quirk in Cash WinFall shortly after it was introduced in 2004, allowing them to make an almost guaranteed profit as long as they purchased enough tickets at the right time."
There are hundreds of posters on LP that believe they found quirks in almost every lottery game including scratch-offs. All the lotteries are keeping at least a 40% of there total ticket sales so while it's possible there are profitable systems, it doesn't look like they are making much of dent on overall lottery profits.
"The groups figured out that if they bought at least $600,000 worth of tickets, the chances were excellent that they would win back 15 percent to 20 percent more than they spent."
Since their profit came from the "roll down" part of the jackpot, from the lottery's perception it was no different than one $2 ticket winning $40,000 instead of $4000. The lottery already knew the percentage of the total wagers that would be paid out to the winners and even if the syndicates were getting most of the winners, the lottery was still making a profit and had no effect on the odds against the $2 betters winning at least $20,000 on a bet that paid $4000 when the syndicate didn't play.
The only real problem was if the syndicates using the lottery terminals were preventing the average player from making a bet.
It's obvious lottery agents were involved ("Everything is very organized and runs smoothly," wrote Marino, who mentioned that the owners of both stores were part of the Michigan betting club.) and the officials knew that something was going on when a store averaging $10,000 in sales had over $600,000 in sales when the "roll down" started.
"Especially when they knew exactly what was going on for years and even seemed to cooperate on not informing the public when a rolldown was happening."
That only happened one time when a syndicate decided to buy 700,000 tickets to force a roll down which was over 2 times higher than their usual bet when a roll down was immanent. The lottery should have known something was going on based on sales volume, but couldn't make the "roll down announcement" until sales reached the roll down amount. It would be worse if the lottery told the public there would be a roll down when there wasn't enough tickets sold to force one.
I do agree there was more involvement by lottery officials than is known, maybe even criminally but for now on paper it looks like their involvement just generated more profits for the lottery. Whomever designed the game should have known the possibility of large bets getting an advantage, but probably though nobody would bet that much money.
The only local lottery game worth playing for small time gamblers is Mass Cash (pick 5). $100,000 for picking 5 of 35 numbers is good odds. My numbers though have never showed up. Loyalty to lotto numbers can be an expensive exercise.
10/4 Ridge
All big money games of chance & speculation, including the stock exchange, attract the attention of manipulators from outside & inside with many who find the advantage edge - get away with it!!
EddessaKnight
This is where the FED's should step in and go through with a fine tooth comb what the lottery knew for years. Look at the bank accounts of all the employee's who worked for the lottery etc. Instead, their too busy looking for steroids in baseball...
I grab three Mass Cash & two Megabucks Doubler QP's every Friday when I cross into your state. I've had good luck on both, hit 4 out of 5 on Mass
Cash once, tons of 3 out of 5. Same with Megabucks Doubler. And these tickets still only cost $1 to play.
Amen To That !!!!!!!!
It's hard for me to believe that the average lottery player who understood how the game worked wasn't aware that someone willing to spend a large sum of money had a better chance of winning a second tier prize or was almost guaranteed to win one if they were willing to spend above a certain amount.
spending $40 million on tickets over a seven-year period and winning an estimated $48 million.
It says they won $48 million, so does that mean they only profited $8 million? Does anyone know how many were in the group? I guess it would be worth it for the almost sure money they were getting, but it seems like they would be getting a lot more than they were, figuring all the illegal activities they and others were doing in order to win.
It would make more sense to me if they profited the $48 million (meaning they won $88 million).
I was one of the people who figured this system out. I'm not as active on the LP forums as I once was, but I used to be a semi-regular. I know there are other LP regulars who also figured it out. If you read all of the forums all the time, you would have come across people discussing this strategy (though not in explicit detail) years ago.
First off, I'd like to address the comment, "all the illegal activities they and others were doing in order to win." No one did anything illegal. Read the original report for details: http://www.mass.gov/ig/publications/reports-and-recommendations/2012/lottery-cash-winfall-letter-july-2012.pdf
Second, these are statewide totals, so I don't know the exact details, but I'd bet the total profit was more like $8m than $48m. 20% profit is nothing to sneeze at.
Third, there was no corruption. The "scandal" here is that the lottery designed a game that was actually possible for players to win once in a while, and they let people keep playing their system even after it was shown to work. That's not much of a scandal. A bunch of serious lottery players finally found a system. That's not a scandal, that's what everyone on this whole web site tries to do every time they play.
So, what's the secret to cracking the lottery? Well, I can only speak to my system. Which is math. Lots and lots of math. And legwork. Analyze every game in the country you can find. Are there any strange rules? What happens when one game ends and another begins? Taking all of the small prizes into account, what's the expected value of a dollar bet? Is there any advantage to playing certain numbers, or combinations of numbers? (Birthdays and betslip patterns actually matter more than you'd think.) Balls vs RNG's seem to matter less than most people think, but there are definitely some RNG's out there that are broken. I wouldn't count on a broken RNG to stay broken, though. I'd just stay away from it entirely. Balls aren't exactly infallable, either. I remember seeing one state that moved the location of the drawing, and for weeks afterward, for every single drawing, there were more balls from the left-hand columns than from the rest of the machine. I stayed away from that game, too, until they finally got the draw machine installed right.
It's hard to keep track of all these games as they come and go, and as jackpots rise and fall. You know who can help you with that? Todd. Pay the man. THIS SITE IS THE BEST LOTTERY RESOURCE THERE IS, END OF STORY, AND A PAID MEMBERSHIP CAN SAVE YOU HOURS OF HEADACHE EVERY MONTH. If you see something promising on here, by all means, go to that state's lottery web site and read up on all the details, but without LP, I'd be totally lost.
Finally, if someone else has a system, pay attention to it. Analyze it yourself. Does it make sense, or does it rely on some strange assumption? Most of the time, it's not going to go anywhere, but you gotta kiss a lot of frogs if you want to find a prince.
Also, stay the heck away from the Texas lottery. Something's off about it. Though, like anything else lottery related, if you read LP enough, you already knew that.
I agree that it would not be a surprise if some lottery officials were on the take. It sounds far too convenient that they were only in it for the profits of the game and not for personal gain. At the very least, there were probably performance bonuses at stake that they were all too happy to let these players achieve for them.
One thing that bothers me about this -- other than the obvious flaws that have already been discussed -- is the per-store ticket limit that has been implemented. I'm sure it's set at a level that will rarely be reached, but I would be not be a happy camper if I walked into a store to purchase tickets and was turned away becaue they hit their limit.
This statement bothers me the most.
"a handful of math and science wizards, including Massachusetts Institute of Technology undergraduates"
This is not the first time something like this has happened. All that is needed is the money to buy the tickets.
No advanced brain power required.
RL
Respectfully, I would say that aside from some here at LP, insiders in the Mass. lottery, and those few who were very mathematically inclined to
spot this games vulnerabilities; Advanced brain power was required, in addition to bank rolling this scheme.
Hindsight is always 20/20, and looking back now, it seems obvious to spot this abnormality. But back in the day, the wool was pulled over most
peoples eyes. If it was that obvious, and no brain power was required, there would have been thousands more doing this from around the country.
Looks like there will be another MIT movie like "21" except this one will be called "WinFall".
Good title!
Respectfully, I have to disagree. Playing any game in which the JP prize is rolled down to the lower
prizes once a certain level has been reached does not take any extra smarts. This is the way the
game was designed to attract more players. If my game rolled down and the prize for a 4of5 jumped
by a factor of ten or more times it's normal payout I would have to be seriously retarded not to jump in
on those drawings. Someone with enough cash could jump in big time and by covering the second
level prizes could do very well and there is always the chance they could hit the JP. By making such large
purchases they could force the JP over the 2 million limit prematurely off setting the onrush of common
players trying to take avantage of the games big payouts thus leaving them with the low probability that
someone else might hit the JP as their biggest gamble in which if it was hit they would lose big. In every
market I know of the more you invest the bigger the expected return. Their efforts would most likely increase
the payout for every prize paying ticket. Ticket sales would be expected to increase for any roll-down drawing
which shows many people try to take advantage by playing bigger. The lottery makes it's profit off the top
and since the odds were not changed then these people were just taking advantage of the prize increase.
What I would like to know is how many JP prizes they won playing at this level.
RL
Obviously this game was designed and set up for periodic roll downs, and this was the major draw to the game. Any average player was aware
of this inherent game feature. The trick of course was all about timing your plays for when the roll down took place. Prior to the math and science
wizards, and M.I.T. undergrads analyzing and determining that large scale betting was in their favor, this was not common knowledge at the time.
A third group of scientists, from B.U. & N.E. University who upon further analysis, concluded that not only was large scale betting in their favor,
but they were able to figure out a way to win nearly the entire jackpot! This discovery was not only unknown by anyone else at the time, but was
something even the lottery officials erroneously concluded was totally impossible!
Bear in mind these additional conclusions for how to nearly win the entire jackpot, were not revealed by some average player tweaking
on it at home in their spare time, but exclusively by some of the most brilliant mathematical M.I.T., B.U., and N.E. University students, professors
and scientists in the world.
To recap, all players were aware of the roll downs, and the huge potential for scoring multiple factors in secondary prizes. Agreed.
The huge breakthrough of monopolizing and nearly winning the entire jackpot however, came compliments of the think tanks from all the
above universities. Hence the reason I say, some major brain power had to be involved to take this game to the pinnacle of this blatant exploitation.
We will probably never be in agreement on this one, but at least we can agree to disagree.
Megabucks Doubler is ok. I only do season tickets for that. Mass Cash burns a hole in my pockets but I want it thatway for now
mcginnin56
I guess I am just way ahead of the curve, I did not see anything that led me to think that anyone
with the money could have came up with the same methods. I read something similar to this type
of play many years ago. I don't see anything here that even points to the need for any advanced
fields of study. The lottery officals never considered someone would buy 80% of the tickets and the
rest is basic math.
The whole purpose of my post was that things must be getting very bad. I would think that any of the
these super stars of academics would not think that splitting a few million dollars in however many ways
over a 7 year span would interest them much. I can just see all these Brains filling out a few hundred
thousand betslips. With all that brain power you would think they would have taken the time to and a
few bucks and built a printer that would mass print the tickets. Who knows, they might have hired a few
illegals to do it for them. Maybe it took all that brain power to poor over all the data because they could
not believe it was that simple and wanted to make sure, who knows. No wonder we have fallen so far
behind on the academics stage in math and science, our professors are all working on the lottery so they
can live like rockstars. Stupid me, never thought of that one until now.
RL
Sadly I guess, many of us are still behind the curve. One day, perhaps many years from now.......we will at least catch up to the curve.........
But never quite get ahead of it.
Perhaps that is the real meaning of success in America, live rich, like rock stars
crash and burn, then die broke. The end. 
"The lottery officals never considered someone would buy 80% of the tickets and the rest is basic math."
The only thing unique is a small group came up with the $600,000 to make the bet and that's probably because credible math professors convinced them a profit could be made. I doubt the average lottery player who reached the same conclusion would get the same credibility to get the necessary funding.
Even though the same conclusion about the game was reach by LP members years ago, it would be very difficult to convince one thousand $10 a week QP players to risk $600 on one drawing to make a $90 or $120 profit and getting one hundred to "invest" $6000 would be impossible. Convincing four other people to contribute $120,000 each with an expected return between $18,000 and $24,000 is nothing more than good salesmanship even if the salesman has a doctorate in math.
"I can just see all these Brains filling out a few hundred thousand betslips."
At five lines a card that's 60,000 accurately filled out betslips. They make it look like it would take a math professor to figure out how long that would take and then figure out how long it would take to run them through a terminal. Those of us that filled out and played just 10 betslips several times could make a more accurate prediction.
After the Australia investment group tried to buy all the possible combinations for the Virgina lottery in the nineties and won its jackpot which was greater than the cost of buying the tickets, states were put on alert that there were those with unlimited funds willing to spend them if they could gain an profitable advantage in any game. Most states changed their playing rules to limit the amounts groups or players could easily spend between drawings. Looks like Massachusetts had those rules but made some adjustments to accommodate the big spenders.
"Any average player was aware of this inherent game feature. The trick of course was all about timing your plays for when the roll down took place."
IOW, it was easy to figure out. All you had to do was actually pay attention. Those "math wizards" at MIT didn't do anything but some simple statistical analysis. The relevant difference between them and the average person is that the average person wouldn't have done it. Being smarter and better at math was irrelevant in this situation.
Any idiot who pays attention can find out what the typical salesa re for most games. Once they know that much they can figure out how many tickets they'd have to buy to push sales to a certain point. The numbers are bigger, but it's the same arithmetic you learn in 2nd grade.
There are groups out there that play pick 5 games over the country when the jackpot reaches certain levels that make the return on dollar invested positive. Usually when a jackpot is $575k or more on a 575757 to one odds game is the wagering of large amounts in the tens of thousands are justified. You are going to get back a minimum of 20% of your money bet hitting two and three out of five. You might have dry spells for a long time but over time and with big pockets you will come out a winner.
My question to bingo long is how was the tax situation handled. Obivoulsy claiming losers vs winners is very important. Banging out five playslips on one ticket is necessary to speed up the ticket buying process. It must have been a pain in the a$$ to keep track of those $10 tickets that would cash $2 etc.
I applaud those that did this the lottery buying public should not view this as the game lacks integrity as each person with a ticket has an equal chance, but of course those with the most tickets have a greater chance.
The lack on intergrity in this country are the state governments advertising annuity and offering lump sum, or taxing winnings where we are already paying a tax in 50% takeout. The lottery is a sucker bet ( just like any other bets with no edge) Again I applaud these people for turning the edge in their favor.
If any idiots could have done this to exploit Cash Winfall of most of its jackpot, why weren't they???
The only guys taking advantage of this were the M.I.T, B.U. & N.E. University students, professors and scientists.
If these "idiots" from school could get away with it, why couldn't the likes of someone like yourself, or other similar type people?
The average joe's could have pooed their money just like the schools did, but this never happened.