Lottery Fraud

lottery fraudLots of people play the lottery as it is pretty much the easiest form of gambling. You purchase a ticket with numbers on it and wait to see if those numbers are winning ones. How could that go wrong? Well, perhaps it couldn’t for the average everyday player. Yet, it may come as a bit of a surprise to you that even the lottery can be invaded by fraudulent activity. And this isn’t always occurring due to players, either. Sometimes, inside jobs are discovered.

And while the United Kingdom has had a few instances of fraudulent activity taking place in relation to its National Lottery, this isn’t something that is occurring in one location. All around the world, people have conspired to fraudulently get their hands on thousands or millions in winnings. Let’s take a look at some of the biggest lottery frauds committed worldwide, and also check into what sort of security these lotteries have in place to try and stop this from happening.

The UK Lottery Winner Who Conspired with Camelot Employee

Anyone in the United Kingdom will probably know that Camelot Group is the one to operate the country’s National Lottery. You would expect that the people controlling such a big operation could be trusted. Yet, even as recently as 2019, there have been issues with employees taking advantage of the system.

News reports emerged last year of a man cashing a fake National Lottery ticket in order to claim a £2.5 million jackpot. Edward Putman was found to be guilty of conspiring with a Camelot insider in order to cheat the system. However, despite this story becoming much bigger public knowledge in 2019, the counterfeit ticket was actually used 10 years prior. Putman organised a plan with his friend Giles Knibbs, who was employed in the Camelot security department at the time. The duo submitted a deliberately damaged forgery, and this was done just before the 180-day claim period was over.

However, Knibbs clearly couldn’t live with the guilt of what he had done, confessing to his friends that he had assisted in conning the National Lottery out of the huge jackpot. An angry row sparked between the two fraudsters over how the winnings should be divided between them, and Knibbs took his own life as a result.

Putman was found guilty of fraud by false representation in October of 2019 by jurors at St Albans crown court. Putman, who is a convicted rapist as well, was paid the jackpot sum by Camelot, despite the bottom part of his forged ticket missing its barcode. The genuine winning ticket was supposedly purchased in Worcester, and the actual winner has never been discovered.

The scam was said to have begun once Knibbs saw documents being printed off that contained details about big wins that were yet to be claimed. It took multiple attempts at creating a successful forged ticket, with Putman visiting 29 different shops just prior to the 180-day period coming to an end. A different ticket was given to each location before the right number was found, with the correct code being submitted at a shop in High Wycombe in August of 2009.

In 2016, the Gambling Commission also fined Camelot a total of £3 million in relation to the £2.5 million secured by Knibbs and Putman. It said that the operator had breached its licence with relation to controlling databases, investigating prize claims and paying out prizes.

Shopkeeper and Wife Jailed for Claiming Winning Ticket

It’s not only insiders that get in on the act of fraud though, either. Retailers selling tickets to customers can also engage in it, in a bid to secure themselves a hefty win. Such was the case in 2011, when shopkeeper Alfred Jeevarajah and his wife Anne told a loyal customer that his winning ticket was only worth £10.

Gwyn Badham-Davies, a 73-year-old customer who visited the store to check his lottery ticket in July of 2011, asked the 38-year-old Anne to scan it in for him. She did as he asked at the shop in Hingham, Norfolk, and would definitely have seen that he had matched five of the numbers and the bonus ball on her screen. However, the mother of one opted to keep quiet about the big win and informed him that he had only won £10 for matching three numbers.

Afterwards, she pocketed the winning ticket and her 45-year-old husband called Camelot one week later to claim the prize for himself. The Sri Lankan couple were found out by Camelot though, and the police were instantly informed. This led to them both being jailed for a 14-month period after they admitted to the charges of theft and fraud.

How Does the National Lottery Have the Ability to Spot Fraud?

If there is not anyone coming forward to admit that they have conned the National Lottery out of money, how do they know it has happened? In the case of Mr and Mrs Jeevarajah, they kept a hold of the winning ticket themselves and simply phoned it in as their own. Therefore, how was it possible that Camelot could suspect fraud was taking place?

Well, the operator of the UK’s National Lottery said that it has the ability to track every single ticket sold. Details such as when and where they are bought, when a winning claim is made and scanned into a terminal and more so is something that they are well informed on. These are measures that have not only been in place since Camelot took over operation of the National Lottery, but that have also been readily improved upon throughout the years.

Fraud in the United States

It’s not only the United Kingdom that has suffered through fraudulent activity over the years. The United States has also reported its fair share of such surrounding lotteries in the country. In fact, the TV host of the Pennsylvania Lottery in 1980, Nick Perry was at the centre of a large scandal. Perry was found to be involved in a fraud that involved the creation of replicas of the official lottery balls used within the state’s lottery machines.

Essentially, the fraudulent balls had different weights to the standard balls, meaning that a limited combination of numbers were likely to be drawn. The accomplices to Perry would then go ahead and purchase large numbers of tickets around Pennsylvania, corresponding to the predicted draw results. This enabled them to get away with about $1.8 million in prize money from the state’s lottery.

Yet, suspicion arose when authorities discovered that a large number of tickets were purchased with the eight possible number combinations on them. Perry was convicted of criminal conspiracy, criminal mischief, theft by deception, rigging a publicly exhibited contest and perjury on May 20, 1981. He was sentenced to seven years in prison for his offence, and his accomplices were also tried and convicted.

Hot Lotto Fraud Scandal of 2017

Another big lottery fraud occurred in 2017, when Eddie Raymond Tipton rigged a random number generator (RNG) in order to defraud the Hot Lotto game of $14.3 million. Tipton, a former information security director of the Multi-State Lottery Association (MUSL), would later confess to his crime, being convicted in October of 2015. During his trial, he confessed to rigging lottery draws that took place in Iowa, Colorado, Wisconsin, Kansas and Oklahoma.

It was also discovered that Tipton’s brother, Tommy was involved in the scam, as well as Texas businessman Robert Rhodes. Eddie Tipton was sentenced to a period of 25 years in jail for his crimes following his trial. Evidence was given at that trial to support allegations that he had rigged a Hot Lotto draw on December 29, 2010 (which had been left unclaimed for almost a year) by using his privileged access to an MUSL facility. There, he installed a rootkit on the computer utilising the RNG. He would then proceed with trying to claim a winning ticket with the rigged numbers anonymously.

Both Eddie and his brother were also accused of rigging other lottery drawings, dating back as far as 2005.

China Scandal

China has been at the centre of some of the world’s largest scandals over the years, but in 2004, a Chinese lottery scandal came to light. What happened in this circumstance was that one of four lottery tickets were not given to a pre-arranged winner. This resulted in the arrest of five people and several government officials being removed from their stations.

The Shaanxi Provincial Sports Lottery Centre openly refused to give the unexpected winner, Liu Liang, the prize of a new BMW car. Their claim for this what that he held a fake lottery ticket. However, this was not the case. Instead, it was discovered that a contractor to the lottery company Yang Yongming, had actually cheated on the four top prizes of the lottery.

This saw the authorities deem Liu’s ticket completely valid and a public apology was made to him. Liang never kept the BMW vehicle, though. Instead, he opted to sell it for 300,000 yuan (around £32,693 in today’s money) and then retreated into the Qinling Mountain, where he now resides in a small village away from city life.

Buying Lottery Tickets After the Winning Numbers Were Announced

Another issue that occurred in China, this time in 2005, saw a retailer in Anshan exploit a certain flaw in the lottery draw process. This allowed him to continue selling lottery tickets up to five minutes after the winning numbers had been drawn and announced to the public. The retailer proceeded to buy himself several tickets that featured winning lottery numbers, and he claimed a prize worth $3.76 million (£2.81 million).

The retailer Zhao Liqun was found out though, and as a result of his crime, he was sentenced to life imprisonment in China. To try and evade the justice system prior to this, it was discovered that he has asked neighbours and friends to cash the tickets he had sold to himself at the Welfare Lottery Center. They were then asked to bring back the money to him, according to court sources.

A Flaw in the Retailer System in Canada

The Ontario Lottery and Gaming Corporation (OLG) found itself being taken advantage of between 1999 and 2006, too. Widespread retailer fraud was reported, with authorities noticing that an improbably large number of retailers within the province of Ontario were winning major prizes on the lottery. These differed in value from between $50,000 and up to $12.5 million.

Evidence was then brought forward that displayed certain retailers were failing to inform their customers of their winnings when presented with tickets. Instead, the retailers would inform the customer that they hadn’t won anything and then pocketed the tickets themselves before fraudulently claiming the prize winnings. An investigation was launched into this and it found that widespread insider fraud was taking place amongst the retailers, and this included collusion with both employees and family members.

The investigation led to the arrest, fine and dismissal of four OLG officials.

A Winning Ticket Bought with a Stolen Card

If you were to steal a credit card, would you purchase a lottery ticket with it? Well, that’s what one 33-year-old woman did in Canada. After purchasing the ticket, she discovered that she had won around $50,000 Canadian dollars with it (about £29,000). Unfortunately, because she had purchased it with a stolen card, she wasn’t able to claim the winnings legally. The Atlantic Lottery Corporation only pays out on legally purchased tickets.

The woman was identified from CCTV footage of the location that she bought it from, as police were following up on a stolen wallet report. It all took place in Newfoundland, so this led to The Royal Newfoundland Constabulary arresting the guilty party when she was on course to claim her lottery winnings. She was charged with two counts of possessing a stolen credit card along with five counts of fraud.

In this instance, the winnings were rerouted to the Atlantic Lottery’s unclaimed prize account. Funds within this are then put to use for future prize amounts on the same lottery.

Jail For Man Who Misused Lottery Profits

Not a player this time rather the CEO of a lottery operator, Capen Limited, who was jailed in late 2021 for 3 months for depriving a charity of £285,000 between 2018 and 2020.  Capen Limited had their license suspended by the UKGC in December 2020.  

Simon Rydings from Edinburgh misused lottery funds from customers that had bought tickets in good faith that any profits would go to charity.  He told the court he could not pay back the £285k because he had spent it on other business costs.  In addition to the 3 month sentence he was ordered to repay £1,000.

The ruling showing that lottery crime will be punished for operators as well as players.  Although, the argument could be made that a 3 month sentence and £1000 fine is hardly the biggest deterrent compared to similar crimes.