Published on: November 8, 2022, 10:52 am.
Last updated: November 8, 2022, 11:19 am.
A Waterford, Mass., man who won the lottery more than 13,000 times pleaded guilty Friday to charges of conspiracy to commit tax fraud, conspiracy to commit money laundering and filing false tax returns.
Mohamed Jaafar, 30, is accused of running an industrial-scale ticket-cashing scheme with his father, Ali Jaafar, and brother, Yousef Jaafar, that raked in $21 million.
The 10 percent
In Massachusetts and elsewhere, money owed in federal taxes or child support can be deducted from lottery winnings above a certain threshold, $600 in this case.
Winners in this situation may be incentivized to sell their tickets to an underground discount ticket collection business. Usually the person collecting the ticket takes 10%, hence the terms “discount” or “10 percent”.
Jaafar, along with his father and brother, was indicted by a federal grand jury in August 2021. The family initially denied the charges. But Jaafar now admits to conspiring to operate a kickback scheme between 2011 and 2019 that charged winners between 10% and 30% of the value of each ticket, according to prosecutors.
Jaafar personally cashed about 2,500 tickets for about $3.3 million in winnings, but only paid $21,000 in taxes. He also received $106,032 in tax refunds for gambling losses cooked up during the same period, according to the indictment.
Ali Jaafar cashed more than 10,000 lottery tickets for a total of $15 million, according to court documents. Yousef Jaafar collected 1,360 for a total of $2.5 million.
Jaafars Sue Lottery
The Massachusetts Lottery Commission temporarily banned Jaafars in 2019 when officials realized that Ali was “the top individual lottery ticket winner” that year and his two sons were the third and fourth.
The Jaafars responded by suing the Lottery for an injunction to allow it to continue cashing its endless supply of winning tickets. They were not successful.
Sentencing is scheduled for next March. The charge of conspiracy to defraud the IRS carries a penalty of up to five years in prison, three years of supervised release, a fine of $250,000 or twice the gross gain or loss, whichever is greater, and restitution.
In 2019, Clarance Jones, 81, a frequent winner from Lynn, Mass., was sentenced to two months in prison for fraud and filing false tax returns. He cashed thousands of tickets worth more than $10 million but squandered the profits at casinos and racetracks, his lawyer said.