MIT Student Cracks Lotto Code, Starts Company, Wins Millions

It was legal, and he wasn't the only one doing it

   

MIT Student Cracks Lotto Code, Starts Company, Wins Millions

Lottery codes can be cracked, but you’ve got to be a mathematical genius to pull off such a feat. One state that’s not short on brilliant math minds is Massachusetts.

State Inspector General Gregory W. Sullivan recently filed a report confirming that a few gambling groups, including one that formed when its leaders were students at Massachusetts Institute of Technology (MIT), had cracked the code to Massachusetts State Lottery’s Cash WinFall game — and were winning big-time.

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Not only that, lottery officials knew the activity was going on for years, but didn’t do anything to stop it because the groups had boosted sales. In fact, had The Boston Globe  not dug into the matter last fall, an investigation might not have been launched.

The game has since been discontinued, and no legal action will be taken against the code crackers since “ordinary gamblers” still had a fair shot at winning the game.

But the story of the report begs answers to two questions:

1.  Who are these genius code-crackers?

2.  How on earth did they do it?

An MIT student, a biomedical researcher and a Michigan Retiree

James Harvey was just a typical MIT student looking for a senior project when he discovered there was a “win-more-than-you-lose” system to WinFall, and it involved buying a lot of tickets. According to the report, Harvey began trying his strategy in 2005 and was quite successful. He then partnered with another student, Yuran Lu. The two started their own betting company they named Random Strategies.

Dr. Ying Zhang also figured out the system and started the Doctor Zhang Lottery Club Limited Partnership in 2005. Zhang left his job as a biomedical researcher in 2006 to focus on his new WinFall venture.

Michigan retiree Gerald Selbee formed the 32-member investment syndicate GS Investment Strategies of Michigan. According to the report, the group usually bought about 312,000 tickets per game.

How they beat the system

WinFall was easy for geniuses to crack because the game — which involved purchasing a ticket for $2 and then picking six numbers — had a $2 million cap on its jackpot. The odds of actually hitting that jackpot were about one in 1 million, according to officials.

However, even though the jackpot was elusive, buying tickets in bulk still allowed the groups to make millions because of the cap. If the $2 million cap was reached and no one matched all six numbers, a “roll-down” went into effect. A roll-down meant that the $2 million was then dispersed among the runner’s up.

This graphic from The Office of the Inspector General does a great job of clarifying the math.

lotto MIT Student Cracks Lotto Code, Starts Company, Wins Millions

Some of the groups made out better than others, and the official report estimates that Random Strategies made about $3.5 million from its WinFall endeavors.

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Article printed from InvestorPlace Media, http://investorplace.com/2012/08/mit-student-cracks-lotto-code-starts-company-wins-millions/.

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