A network of supermarket owners and tax-evading lottery winners helped a father and his two sons in Massachusetts carry out what officials are calling “the largest money laundering operation the lottery has ever seen.”
Ali Jaafar, 63, and Yousef Jaafar, 29, were found guilty by a federal jury last December on multiple charges of tax evasion and money laundering.
Mohamed Jaafar, another son of Ali Jaafar who once interned for Democratic Senator John Kerry, pleaded guilty in November 2022 to his role in the scheme.
The elaborate “ten percent” system involved the trio buying tickets from winners who wanted to avoid claiming their prizes from the Massachusetts State Lottery Commission.
The move allowed actual winners, who may have government liabilities, to avoid identification by the commission, which is required by law to withhold any outstanding taxes such as child support payments before paying out prizes.
Winners who worked with the Jaafars believed that handing over 10 percent of their winnings to the fraudsters would still cost them less than the liabilities the state would demand of them if they identified themselves as winners.
Over a decade, the Jaafars pocketed 14,000 lottery winnings, laundered more than $20 million in proceeds, and then lied on their tax returns to defraud the IRS of about $6 million.
Ali Jaafar (pictured), 63, and Yousef Jaafar, 29, were found guilty by a federal jury last December on multiple tax evasion and money laundering charges in what officials called “the largest money laundering operation the lottery has ever seen.”
Ali Jaafar moved to America in the early ’90s after a breathtaking childhood and early adulthood that led him to describe his family as the “happiest in Massachusetts,” according to the Boston Globe.
He was born in Lebanon in 1958 and eventually moved to Sierra Leone after experiencing war and street violence as a child.
There he met his wife Souraya and had three children, but was forced to uproot again after Liberian rebels invaded Sierra Leone.
The couple obtained U.S. visas through Ali’s parents, who had moved to America years earlier. They settled in Massachusetts in 1992, and Souraya later ironically said they had won “the visa lottery.”
It is believed that Ali Jaafar was driven by a desire to provide for his family, even though he did not speak much English and had no high school education. For a while he worked as a gas station attendant.
He eventually made his way by saving enough money to invest in his own taxi and in a prepaid phone card company as they became more popular in the 1990s, which enabled him to purchase a home for $206,000 in 1997.
The rest of his family was also doing well. Son Mohamed attended the prestigious Northeastern University and eventually earned a master’s degree in business administration.
After working as an intern for then-Senator John Kerry, Mohamed became fully involved in his father’s business.
Yousef Jaafar (pictured), 29, was sentenced to more than four years in prison, while father Ali was sentenced to five years
Mohamed Jaafar, another son of Ali Jaafar who once interned for Democratic Senator John Kerry, pleaded guilty in November 2022 to his role in the scheme and was sentenced to six months in prison
In 2011, it was known what Ali Jafaar was up to. He picked up a winnings of $217,000, which increased to $367,000 in 2012 and $1.3 million in 2013 when Yousef and Mohamed joined him in winning tickets.
The family’s strategy wasn’t new – winners sometimes worry about publicly claiming their winnings for fear of having to hand over money to the tax authorities. They use people known as “ten percenters” to help.
These middlemen pay cash for a winning ticket and take a 10 percent share – sometimes 15 to 25 – and can claim the official prize while the original winner took cash under the table.
In the eyes of the law, the scheme was considered tax evasion because the “ten percenter” attempted to avoid taxes in his year-end statement by claiming gambling losses equal to his winnings or by presenting a fake ID.
Mohamed confessed to the plan in court, saying they would receive calls from store operators whenever there was a ticket over $600.
One of the men came along, bought the ticket for a pre-arranged fee, let the real winner sneak away and paid the operator a small fee.
During these three years, Ali Jaafar claimed over 1,000 tickets before increasing both his ticket claims and his prices by 2019, using the tried and tested method of claiming his losses to avoid paying taxes on the tickets he won.
They claimed so many tickets that it didn’t matter that the men were buying these tickets for 75 to 85 percent of their value.
Michael Sweeney, then managing director of the Mass Lottery, hired new employees to combat the Jaafar’s machinations
Dan O’Neil, compliance director for the Massachusetts State Lottery Commission, had asked lottery agents to keep an eye on the family, which was now well known to the commission
After an investigation into the “ten percent” led the lottery to take the practice more seriously, then-commissioner Michael Sweeney began assembling a team to investigate the Jaafars and suspended them in May 2019.
Dan O’Neil said it was job number one for him when Sweeney hired him shortly after as the new director of compliance and security.
“My first day – that was my instruction.” “There were a few internal issues that I had to deal with, but the overall issue facing the lottery – in Michael Sweeney’s eyes – was ten percent and the integrity of the game.”
According to the Boston Globe, O’Neil asked lottery agents to keep an eye on the family, who were now well known within the commission.
“We’re just moving forward,” O’Neil says, noting that 40 other fraud cases have been closed in the last year. “And now we have the tools. “We have the precedent.”
The Jaafars were known as “high-frequency winners” and were even suspended by the commission, prompting the men to seek legal counsel.
The lottery had examined their winnings and found that the Jaafars would have had to buy 22,859 tickets from just one brand to win as much as they did. That’s 952 tickets per hour and 16 tickets per minute.
O’Neil finally confronted Yousef Jaafar in the summer of 2020 when he had cashed in three new winning tickets.
Ali Jaafar and his sons, who are considered high-frequency winners, faced confrontation in 2019 after a judge ruled that the Massachusetts Lottery can suspend high-frequency winners
Another son, Mohamed Jaafar, was also involved in the scheme, pleaded guilty to conspiracy to defraud the IRS on November 4, 2022, and is scheduled to be sentenced on March 8, 2023
The official refused to cash his tickets, which angered Yousef, who believed he had a legal right to the payout.
Mohamed has since described himself as “naive and weak” and even “pathetic” and believes he should have resisted his father’s “dark path” and protected his brother.
After pleading guilty to conspiracy charges in New Jersey in 2016, he sought therapy for depression but continued to help his father until finally telling him in 2017 that he was no longer there, according to Mohamed’s attorney, John F. Palmer.
Palmer argued that Ali Jaafar exerted “significant psychological pressure” on Mohamed and that Ali allegedly kicked Mohamed out of their home unless he continued the family business, Palmer claimed.
In October 2019, Yousef Jaafar had started using friends to redeem tickets, adding another layer to the program.
Both the Lottery Commission and the IRS began getting involved after linking the friends to the Jaafars. The investigation fully began at the end of summer 2020.
Yousef Jaafar brought the three winning tickets that sealed his fate to lottery headquarters on June 26, 2020. Over the next two weeks, O’Neil also challenged his two sons to go on a hike.
One of Yousef’s friends, Nicholas Frenkel, agreed to testify against the Jaafars and said he had coached him on the plan. Frenkel negotiated an immunity agreement with the state.
O’Neil said investigating the Jaafars and “ten percenters” like them was his most important task when Sweeney hired him
Between 2011 and 2020, the Jaafars redeemed more than 14,000 lottery tickets and secured over $20 million in Massachusetts lottery winnings. Ali Jaafar will be confronted in 2019
The Jaafars were soon charged with conspiracy to defraud the United States, conspiracy to launder money, and multiple counts of filing false tax returns.
Mohamed struck a deal to cooperate with federal prosecutors in November, just a month before her trial.
In December, Yousef and Ali Jaafar were found guilty by a federal jury after a five-day trial and sentenced shortly thereafter.
Ali was sentenced to five years in prison, while Yousef received a sentence of more than four years. They were also ordered to pay $6 million in restitution and forfeit the profits from their scheme. Mohamed received six months in prison.
The defendants paid money to the owners of dozens of businesses that sell lottery tickets to facilitate the transactions, and the state lottery commission is in the process of revoking or suspending the licenses of more than 40 lottery agencies, authorities said.