On Monday, a 19-page indictment was unsealed in U.S. District Court in Massachusetts that charged a father, Ali Jaafar, along with his sons, Mohamed and Yousef Jaafar, with more than a dozen counts of fraud, money laundering and tax evasion over an alleged ticket-cashing scheme that primarily involved scratch-off lotto tickets sold at convenience stores.
Prosecutors say the trio took part in an illegal scheme from 2011 to 2019, according to The New York Times. They are accused of claiming prizes on behalf of actual scratch-off winners, who may have been avoiding cashing the tickets because of potential garnishments.
In Massachusetts there’s a requirement that winnings be garnished for state/local taxes and child support payments on any prizes exceeding $600. As a result, some people will reportedly sell their tickets to someone else while those who actually cash the ticket take a commission from the winnings of around 10 to 20 percent. The scheme apparently even has a name (10 percenting).
The father and his sons are also accused of falsely reporting six- and seven-figure gambling losses on their tax returns, which allowed them to pay significantly lower taxes.
The indictment says that Ali paid less than $25,000 in federal taxes off of $15 million in lottery winnings. It also says he got $886,261 in tax refunds from phony losses chalked up to gambling.
Mohamed’s payments towards federal taxes were allegedly less than $22,000 despite $3.3 million in winnings from the lotto. His bogus tax refunds allegedly brought in $106,032.
As for Yousef, he reportedly paid less than $11,000 off of winnings of $2.4 million. His tax refund from made-up gambling losses was pinned at $185,951.
The family had actually gotten onto the radar of the state’s lottery officials as Ali was the “top individual lottery ticket casher” in 2019. Mohamed ranked third on the same list, while Yousef was fourth.
A temporary suspension preventing the three from cashing tickets was enacted in 2019. During the same year they unsuccessfully challenged that ruling in court.
On Monday afternoon, while appearing in federal court via videoconference, Ali and Mohamed pleaded not guilty. They were arrested earlier in the day. They’ve since been released on their own recognizance.
Yousef’s current legal status was not immediately clear.
Charges were related to one count each for conspiracy to defraud the United States, and money laundering conspiracy. Ali and Mohamed also got five counts of filing false tax returns, while Yousef got three counts for the same alleged infraction.
Massachusetts’ state lotto rules stipulate that a person who cashes in 20+ prizes of $1,000 or more in a single year be reviewed by the director of the lottery. If that director deems it statistically “improbable” for someone to win that much, then the person could get a 90-day ban from claiming prizes over $600.
Subsequent penalties for the same rule violation bumps up the duration of those suspensions.
Administrative action was taken against the family and their case(s) were sent to law enforcement.
The executive director of the Massachusetts State Lottery, Michael R. Sweeney, says similar lottery fraud cases are being looked into.
