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Luck may have run out for Watertown family: They're indicted for tax evasion on $21 million in scratchie winnings over a decade

A federal grand jury last week indicted a Watertown man and his two sons for an alleged scheme in which they managed to evade hundreds of thousands of dollars in taxes on the $21 million in winning state lottery tickets they cashed in between 2011 and 2020.

In the indictment, a grand jury alleged that Ali Jaafar and sons Mohamed and Yousef Jaafar did not actually become the winningest Lottery players in history by getting lucky - Ali Jaafar allegedly cashed in more than 10,000 winning tickets during that period- but through a "10 percent" scheme, in which they would buy winning tickets, cash them in under their names and then keep 10 to 20% of the winnings.

At the same time, the indictment charges, the three claimed massive lottery losses, which let them reduce the amount of profits they had to report on federal taxes by so much that between 2011 and 2019 Ali Jaafar only paid $24,500 in federal taxes on the $15 million in lottery winnings he reported. In fact, the indictment alleges, he earned $886,261 in federal refunds during that period.

The three were formally charged with conspiracy to defraud the government, conspiracy to launder money and filing false tax returns.

The Jaafars, the indictment alleges, often had help from the owners of stores that sold tickets. The store owners would buy the winning tickets from the people who had done the actual scratching - offering immediate cash at a discount instead of having to make the effort to get to a lottery claims office for a check, then hand the tickets over to the Jaafars, who would make that trip and claim 10% to 20% of the winnings before handing the rest over to the store owners.

On or about March 23, 2018, Ali Jaafar cashed a winning $1,000 Massachusetts state lottery ticket that a convenience store owner had purchased for cash at a discounted price. In order to cash the winning ticket the co-conspirator had purchased, Ali Jaafar signed a Lottery Commission claim form in which he falsely declared, under the pains and penalties of perjury, that he was the "sole recipient" of the winning lottery payment and that he was "not claiming prize to assist another in the avoidance of financial obligations."

In 2019, the indictment states, Ali Jaafar was the top winning lottery player in the entire state, while Mohamed Jaafar was third and Yousef Jaafar fourth.

In 2019, the Jaafars sued the state lottery commission for cutting them off from cashing in tickets for 90 days after officials determined the family's scratchie winnings over a six-month period were "factually or statistically improbable." The commission relied on a regulation it had put in place in 2018 to deal with improbable winners.

In that court case, the state presented evidence that, based on the distribution of winning scratchies Ali Jaafar alone "would have had to purchase 12,411 tickets per day (each and every day), which equates to purchasing 517 tickets per hour and more than 8 tickets per minute," to rack up the 569 winning scratch tickets he presented for payment over that six-month period. Also, he presented winning tickets that were purchased "from Lowell to Nantucket, and Boston to Worcester."

In a ruling last October, Suffolk Superior Court Judge Robert Gordon agreed with the state that "the statistical improbability of the Jaafars' Lottery winnings, without improper ticket transfers, is incontrovertible," and dismissed the Jaafars's claim that the 2017 regulation was "an unlawful usurpation of the lawmaking power of the Legislature."

Also last year, according to the federal indictment, the Jaafars took advantage of Covid-19 and the way it forced the public shutdown of lottery claim centers to resume their allegedly cheating ways - submitted claims for winning tickets via mail.

Complete indictment (19.6M PDF).
Memo by state judge dismissing Jaafar suit (659k PDF).

Innocent, etc.

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Comments

But, the dummies blew their load when they sued, yeah?

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Voting closed 32

allowing people to credit lottery losses against lottery winnings is perhaps one of the worst.

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Voting closed 57

Government lotteries are basically taxes in themselves. So if you lose you are paying the government money and if you win you pay more taxes on top of that?

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Voting closed 32

Agree that the lottery essentially works as a regressive tax and is one of the most illogical things in our tax code.

If the state wants more dollars for education, then just spend money on education, and levy taxes on property and income to offset that spending. It's not rocket science.

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Voting closed 28

Saw a comic once talking about how the state he was from was taking all of the proceeds from the lottery and putting it into education, but pointed out that "then people will figure out the odds of the lottery and stop playing so we'll be right back where we started."

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Voting closed 14

For most forms of income taxation, you don’t pay tax on your gross receipts; you pay taxes on your net profits: your receipts less what it cost you to gain those receipts. If you run a business you pay tax on your earnings less the cost of doing business. Walk into the casino with $1000, win some, you’re up to $5,000; lose some, you’re down to $500; win some more; you’re back up to $1,000 and you call it a day and walk out with $1000, you don’t owe any income taxes even though you “won” $4,500.

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Voting closed 33

But if you walk in on the evening of December 31 and leave sometime the morning of January 1, I do wonder...

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Voting closed 18