A father and son were convicted by a federal jury on December 9 in connection with a “ten percent” scheme in which they cashed winning Massachusetts state lottery tickets on behalf of the ticket holders to avoid taxes and get a tax refund.
Ali Jaffer, 63, and Yusuf Jafar, 29, both of Watertown, were found guilty of one count of conspiracy to defraud the Internal Revenue Service, one count of conspiracy to commit money laundering, and one count of filing a false tax return. US District Judge Nathaniel Gorton set the sentencing for April.
Muhammad Jaffar, one of Ali Jaffar’s sons, who was also involved in the scheme, previously pleaded guilty to conspiracy to defraud the Internal Revenue Service and is due to be sentenced in March.
Defendants conspired with others to buy cash discount winning lottery tickets from gamblers throughout Massachusetts, often using convenience store owners to facilitate transactions. This scheme—referred to as “ten percent” because ticket buyers typically keep 10 to 20 percent of each ticket’s value—allows real gamblers to avoid reporting winnings on their tax returns.
The defendants and conspirators then presented the winning tickets to the Massachusetts Lottery Commission as their own and collected the full value of the tickets. The defendants also reported the ticket winnings as their own winnings on their income tax returns and claimed fictitious gambling losses to offset the claimed winnings, thus avoiding federal income taxes and refunds.
Between 2011 and 2020, defendants and co-conspirators cashed more than 14,000 lottery tickets and claimed more than $20,000,000 in Massachusetts lottery prizes. In total, the three family members received more than $1,200,000 in tax refunds by claiming other people’s lottery tickets as their own, then offsetting those winnings with fake gambling losses on their tax returns.
charge of conspiracy to defraud tax authority It provides for a sentence of up to five years in prison, three years of supervised release, a fine of $250,000 or twice the gross profit or loss, whichever is greater, and compensation. The charge of conspiracy to commit money laundering carries a penalty of up to 20 years in prison, three years of supervised release, a fine of $500,000 or twice the value of the property involved in the transaction, whichever is greater, restitution and forfeiture.
In addition, the charge of filing false tax returns carries a penalty of up to three years in prison, one year of supervised release and a fine of $250,000 or twice the gross profit or loss, whichever is greater.