A father and his two sons are facing multiple charges in what the Massachusetts Attorney’s Office alleges is a multi-million lottery scheme.
Ali Jafaar Indicted by Attorney’s Office in Lottery Scheme
Ali Jaafar and his two sons, Yousef and Mohamed Jafaar, have each been charged with one count of conspiracy to defraud the Internal Revenue Service as well as a conspiracy to commit money laundering and multiple counts of filing false tax returns.
According to the US Attorney’s Office for the District of Massachusetts, the defendants have cashed out close to $21 million in winnings from the state lottery on behalf of ticket holders to help them avoid taxes.
In certain states, the practice of cashing out your winning lottery tickets via an underground network of “cashiers” is thriving, as certain individuals do not want the government to know that they have won from the lottery. For example, individuals who owe federal or state taxes, or have unpaid child support, may lose that money as authorities are free to deduct money from those winnings.
What Do Authorities Claim to Be the Case?
In the official release by authorities, the Attorney’s Office claims that the trio participated in a “ten-percent” scheme. The charges explain how Jafaar and his sons bought the winning lottery from their owners at a 10 to 20% discount on the actual ticket value.
Once they had the tickets, the conspirators presented the tickets to the Massachusetts Lottery Commission (MGC) as their own and collect the winnings, thus helping the original holders avoiding paying any tax on the winnings.
To avoid honoring taxes on the winnings themselves, Jafaar and his sons allegedly filed gambling losses on their tax return, which can be deducted from any amounts that are owed to the government.
Just How Successful Is the Purported Scheme?
Authorities were able to catch wind of the scheme as, over the course of nine or so years, the Jafaars successfully cashed out 13,000 winning lottery tickets, resulting in $20,989,284 in net winnings.
Based on the available information, Ali Jafaar paid less than $25,000 on total winnings amounting to $15 million over nine years. He also received tax refunds amounting to $886,261 for gambling losses the Attorney’s Office claims are bogus. Mohamed Jaafar has amassed $3.3 million in winnings, while paying only $21,700 in tax.
They operated between 2011 and 2019 before the Massachusetts Lottery became aware something was off when it realized Jafaar senior was the highest winning player in that year. The MGC is able to review any individual who has won sums exceeding $1,000 on 20 occasions in a single year.
The Jafaar family was banned from participating in lottery games in the state, which surprisingly elicited legal action from the Jafaars themselves. The trio failed to challenge the MGC’s decision.
What’s Next for the Jafaars?
In an official press release, the Attorney’s Office outlined what may happen if they are found guilty, including a fine of $250,000 or twice the gross gain or loss – whichever is greater – as well as restitution.
Worse, Jafaar and his sons may be looking at up to five years in prison. This is only under the charge brought against them for attempting to defraud the IRS. The charge of conspiracy to commit money laundering could lead to up to 20 years in prison.
Meanwhile, the charge of filing a false tax return may result in another three years in prison. Massachusetts State Lottery executive director Michael R. Sweeney spoke to The New York Times and said that the real chance of the Jafaars cashing out close to $21 million over nine years by consistently winning off scratch-off cards was practically zero.
For their part, the trio has denied all wrongdoing, and they have pled not guilty on all three charges. They also argued that they were not aware of any “discount scheme.”