Massachusetts Lottery ‘Ten-Percenters’ Guilty of Tax Fraud

Posted on: December 12, 2022, 05:08h. 

Last updated on: December 12, 2022, 05:41h.

Philip Conneller @casinoorgphilc Read More

Expertise: Gaming Business, Regulation, Tribal Gaming.

A father and son who “won” the Massachusetts Lottery more than 14,000 times have been convicted of tax fraud and money laundering.

Ali Jaafar, 63, and Yousef Jaafar, 29, both of Watertown, Mass., were among the most prolific lottery winners in the state’s history.

Winning 14,000 times is at least theoretically possible. But Massachusetts State Lottery boss Michael R. Sweeney framed it more succinctly when he said of the chances, “The reality is, it’s zero.”

Prosecutors agreed. They said the Jaafars were operating an industrial-scale ticket-cashing scheme that grossed $21 million in eight years.

The Ten-Percenters

In some states, lottery winners who owe federal tax or child support will see these liabilities deducted from wins over a certain threshold. In Massachusetts that threshold is $600.

That’s why individuals who find themselves in this predicament sometimes sell their tickets to an underground ticket-cashing business at a discount. Typically, the casher takes 10%; hence the terms “discounting” or “10-percenting.”

“The defendants conspired with others to purchase winning lottery tickets at a cash discount from gamblers all over Massachusetts, often using convenience store owners to facilitate the transactions,” read a statement from the Justice Department.

In 2019, the Massachusetts Lottery Commission (MGC) noticed Ali Jaafar was the top individual lottery ticket casher that year. They also noticed that his two sons, Yousef and Mohammed, were third and fourth respectively.

Mohammed Jaafar was convicted of tax fraud and money laundering last month.

In total, the three family members received more than $1,200,000 in tax refunds by claiming other peoples’ lottery tickets as their own and then offsetting those winnings with fake gambling losses on their tax returns,” the Justice Department said.

The MGC temporarily banned the Jaafars from playing the lottery in 2019. The family responded by suing the commission, unsuccessfully, for an injunction to let them continue cashing out their endless supply of winning tickets.

 The Jaafars were indicted by a federal grand jury in August 2021

Cheating the System

Sentencing for Mohamed Jaafar is scheduled for next March, Ali and Yousef in April. The charge of conspiracy to defraud the IRS comes with a sentence of up to five years in prison, three years of supervised release, a fine of $250K or twice the gross gain or loss, whichever is greater, and restitution.

“By defrauding the Massachusetts Lottery and the Internal Revenue Service, the Jaafars cheated the system and took millions of hard-earned taxpayers’ dollars. This guilty verdict shows that elaborate money-laundering schemes and tax frauds will be rooted out and prosecuted,” said US Attorney Rachael S. Rollins in a statement.