Massachusetts “Discounters” Imprisoned for Running a $20M Lottery Fraud Scheme

According to the US attorney’s office in Boston, Ali Jaafar (63), and his son Yousef Jaafar (29) from Watertown cashed in more than 14,000 winning lottery tickets over the last decade. The duo, who took the role of “10-percenters”, ran a ticket-cashing scheme at an industrial scale.

While getting rich on their own, the Jaafars were also helping the rightful lottery winners steer clear from paying the mandatory taxes on their windfall, according to the same prosecutors. They accomplished the latter by withholding critical information when filling in the tax returns, thus cheating the Internal Revenue Service out of approximately $6 million.

Buying Winning Lottery Tickets from Massachusetts Gamblers 

The duo started the scheme by purchasing winning lottery tickets in 2011 at a cash discount from gamblers spread all over the state while building ties with the owners of different convenience stores with the purpose of simplifying the transactions.

In some US states, Massachusetts includes, the authorities deduct either child support or federal owed by lottery ticket winners from their wins over a pre-set threshold. For the Bay State, the threshold is set at $600.

This is the reason why some lotto winners decide to sell their tickets to underground businesses that cash out their tickets at a standard 10% discount, which was also what prosecutors found was the case with the “10-percent” scheme run by the Jafaar family. 

After receiving his conviction last December, Ali Jafaar was sent to a federal prison where he will spend five years. His son was sentenced to serve around four years in prison. US District Judge Nathaniel M. Gorton also ruled that the two should pay $6 million in restitution and forfeit the profits from the business.

MLC to Revoke Over 40 Vendor Licenses 

As a result of their involvement in the lottery fraud scheme, more than 40 lotto vendors who had received commissions from the convicted duo for directing winners to them are now at risk of having their licenses suspended or revoked by the lottery regulator, the Massachusetts Lottery Commission (MLC). 

The Jafaars had used the respective convenience stores as go-betweens to buy over 14,000 winning tickets, claimed the full prize amount, proceeded to report the winnings on their tax returns, and claimed equivalent gambling losses that were proven to be fake. 

The gambling losses were used by the two as offsets for avoiding paying federal income taxes, according to the same prosecutors. The Jafaars are not the only ones to commit lottery fraud and pocket millions. Eddie Tipton used a computer code to rig lottery drawings in at least five US states, generating millions in winnings for him and his accomplices. 

In 2017, Tipton received 25 years in prison, but he was released on parole from the Clarinda Correctional Facility in July 2022, after serving five years of his original sentence. 

UK resident Edward Putman also ran an elaborate lottery scam dating back to 2009 that helped him forge a ticket to secure a multi-million-dollar jackpot.

Another Jaafar Family Member Involved in the Scheme 

The Jafaar family first attracted the attention of the authorities four years ago, in 2019, when the Massachusetts Lottery Commission initially noticed that Ali Jaafar was recorded as the primary individual lottery ticket casher in the respective year. 

His sons Yousef and Mohammed were listed as third and fourth. In November 2022, Mohamed Jaafar decided to plead “guilty” to a conspiracy to defraud the Internal Revenue Service. He is currently waiting for his sentence.

Acting United States Attorney Joshua Levy has issued a statement regarding this case, calling it “an elaborate tax fraud”. Levy added that the defendants collaborated in order to recruit a massive network of co-conspirators and thus expand their scheme all across the state.