Father and son from Watertown sentenced in $20 million lottery ticket cashing scheme

A father and son from Watertown were sentenced to prison on Monday for planning and executing an elaborate decade-long lottery fraud scheme, in which they claimed more than 14,000 winning lottery tickets, laundered more than $20 million in proceeds, and lied on their tax returns, prosecutors said.

Ali Jaafar, 63, and Yousef Jaafar, 29, are facing five years and just over four years, respectively, in addition to forfeiting the profits from their scam and paying restitution of more than $6 million, a release from acting U.S. Attorney Joshua S. Levy’s office noted.

The “10-percenting” scheme, which involved dozens of convenience stores across Massachusetts over a nine-year period, resulted in more than $6 million in federal tax loss and has led the State Lottery Commission to revoke or suspend the licenses of more than 40 of its agents, prosecutors said.

In December, a federal jury convicted the father and son of conspiracy to defraud the Internal Revenue Service, conspiracy to commit money laundering, and each of them of filing a false tax return.

Mohamed Jaafar, another of Ali Jaafar’s sons, was also involved in the scheme and pleaded guilty to conspiracy to defraud the IRS on Nov. 4. He is expected to be sentenced on July 25, prosecutors said.

Between 2011 and 2020, the Jaafars purchased winning lottery tickets at a discount from people across the state who wanted to avoid identification by the lottery commission, which withholds taxes and child support payments from payouts, according to prosecutors.

They used convenience stores as go-betweens and lied to the commission, while claiming the full prize winnings as their own.

The Jaafars reported the winnings on their tax returns, but claimed equivalent fake gambling losses as an offset to avoid federal income taxes, prosecutors explained.

In 2019 alone, Ali Jaafar cashed more lottery tickets than anyone in Massachusetts and not far behind, his sons, Mohamed and Yousef cashed the third and fourth most, respectively, prosecutors said.

“This case is, at its core, an elaborate tax fraud,” Levy said in a statement. “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.”

More than $1.2 million of the more than $6 million in federal tax losses went directly to the Jaafars in the form of fraudulent tax refunds, prosecutors said.

“This case should serve as a warning to those who think they can cheat the system for their own financial gain: you will be identified, prosecuted and held accountable,” the acting U.S. attorney added.