It is a longshot to win the lottery, right? A father and his sons set out to beat the odds and ended up in the IRS:CI top ten for an elaborate tax crime.
From the news, lottery proceeds seem to be getting larger—and they are. According to CBS, both Powerball and Mega Millions have slightly changed their rules in recent years which make it harder to win. The cost of playing these lotteries also increased. As headlines grow, so do the number of people buying one or more tickets.
One Boston family made gaming the lottery a family enterprise between the years of 2011 and 2020. Along the way, they filed false tax returns, and laundered more than $20 million in lottery proceeds. How did they do it? Read on.
Ali Jaafar and his two sons Yousef and Mohamed made millions by purchasing winning lottery tickets from actual winners of the Massachusetts State Lottery. Over the course of the tax scam, they bought more than 14,000 tickets from the winning ticket holders. It turns out there are quite a lot of people who win lottery proceeds who prefer to stay anonymous and under the radar of the Internal Revenue Service (IRS). By selling their tickets to Jaafar family members, people holding winning tickets were not reported to the IRS and were able to (at a discount) receive cash under the table without reporting it to the IRS or seeing any of it withheld for taxes, prior tax liabilities, or past due child support.
The Jaafars then presented the winning tickets as their own. In Massachusetts in 2019, Ali Jaafar was the number one lottery ticket winner, and his sons were numbers three and four on that same list. Each family member reported the fake winnings on their tax returns and falsified their tax returns with equal gambling losses to null out taxes owed. The family members earned approximately $1.2 million in misguided tax returns.
Along the way, the family grew their network of complicit convenience store owners whom they paid off to provide them with information and assist with cashing their lottery tickets. The State of Massachusetts has now revoked or suspended the licenses of more than 40 lottery agents.
The curtain fell on the scheme, as it usually does. Mr. Jaafar and his son Yousef were sentenced to five and four years in prison respectively, plus they were required to turn over their profits and pay restitution of approximately $6 million. The other son, Mohamed Jafar, pleaded guilty in 2022 to one conspiracy charge which resulted in a six-month sentence, two-year lottery ban, and almost $100,000 in restitution to be paid.
Acting U.S. Attorney Joshua Levy noted, "This case is, at its core, an elaborate tax fraud. Over the course of a decade, this father-and-son team defrauded the Massachusetts State Lottery Commission and the IRS to pocket millions of hard-earned taxpayers' dollars. These defendants worked together to recruit a wide network of co-conspirators and spread their lottery scam across Massachusetts, avoiding detection by repeatedly lying to government officials.”
Bottom line? Winning the lottery remains exceedingly difficult to do.
Concerned about compliance or a foreign bank account? Speak with our tax attorneys about an IRS audit or criminal tax charge
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