The thriving practice of cashing out winning lottery tickets via an underground network of “cashiers” to avoid tax complications has captured the headlines this week as a father and his two sons were charged in connection with a “ten-percent scheme”.
They allegedly cashed winning Massachusetts state lottery tickets on behalf of the ticket holders to avoid paying tax on the winnings.
Ali Jafaar, 62, and his sons Yousef Jafaar, 28, and Mohamed Jafaar, 30, all of Waterford, Massachusetts, were arrested “on one count of conspiracy to defraud the Internal Revenue Service, one count of conspiracy to commit money laundering and multiple counts of filing false tax returns.”
According to the Attorney’s Office, the family claimed nearly $21m in winning lottery tickets from over 13,000 tickets between 2011 and 2019.
As part of the “ten-percent” scheme, the defendants allegedly bought winning lottery tickets from their owners for a 10-20% discount, thereby allowing the original winners to avoid declaring the winnings on their tax returns.
As a result, the Jafaars allegedly presented the winning tickets to the Massachusetts Lottery Commission as their own and collected the full value of the tickets.
Additionally, according to the Attorney’s Office, it is alleged that “the defendants reported the ticket winnings as their own on their income tax returns and improperly offset the claimed winnings with purported gambling losses, thereby avoiding federal income taxes.”
The three charges brought upon the defendants are conspiracy to defraud the Internal Revenue Service, conspiracy to commit money laundering and filing false taxes and, if found guilty of all three, the defendants could face a sentence of up to 28 years in prison and a fine of up to $1m.