This is an article by Joe Saumarez Smith that appeared in the February 2001 edition of Business Life, British Airway`s inflight magazine for business class travellers.
AT some point in their lives, most people dream of winning the lottery. But few people go as far as to buy every possible winning combination in a bid to guarantee they will scoop the jackpot.
But whenever there is a huge lottery jackpot anywhere in the world, you can be pretty sure that is exactly what will happen. If the mathematicians and statisticians show the chances of winning a huge payoff is right, then the betting syndicates move in.
Around the world their strategies differ but a common theme is that they find a small shop with a lottery terminal and then buy it from an astonished shopkeeper. They shut the shop to the general public, connect the lottery to their computer and start buying every combination possible. Soon the shop is knee deep in lottery slips as the syndicate tries to cover the 14 million or so potential combinations before the draw. A week later they sell the shop back to the owner at a substantial loss – and leave with a few million in local currency.
If this seems fanciful – or insane – you only have to look at the Australian syndicate led by Stefan Mandel. They managed to keep their existence relatively secret until the syndicate hit the big one, a single ticket which paid $27 million in the 1992 Virginia State Lottery in the USA. It was the fourteenth big lottery win engineered by Mr Mandel and, as it turned out, his last major coup.
Simply explained, his syndicate waited until a lottery anywhere in the world had rolled over its jackpot for weeks on end. When the jackpot was, say, £20 million, but there were only 8 million possible winning combinations, his team would move in and start buying. Mathematically they calculated they could make between 120% and 400% return on their money, depending on the numbers drawn. If a popular series of numbers came out – numbers under 31 are played far more often than numbers over 31 because people choose their friends’ and families’ date of births – they would win less, but they would still be ahead on their investment.
What Mr Mandel had not realised is quite how peeved the Virginian authorities would be. They did not expect their largest ever jackpot to be exported and launched an enquiry. Their investigations found that 35 agents purchased hundreds of thousands of tickets but that even a team that size was unable to cover the 7,059,052 possible combinations of tickets, so that when shortly before midnight on 15 February, 1992, the numbers - 8, 11, 13, 15, 19 and 20 – were drawn, the syndicate were more than mildly concerned that they had bought five million tickets in vain. Fortunately, they had covered enough bases and held the winning ticket.
There the luck pretty much ran out. The taxman stated that a 30% tax on gambling winnings should be imposed, as it was a professionally-orchestrated operation rather than winnings by chance. The CIA, FBI and Internal Revenue Service in the United States, and the Australian Securities Commission, National Crime Authority and the Victoria Police gaming squad all became involved, although no wrongdoing was proved. The members of the syndicate fell out, Mandel fled to his native Romania and in August 1995 was declared bankrupt, with debts in excess of A$500,000.
Not all betting syndicates hit such big jackpots or such bad luck. In the UK I can think of four horseracing syndicates run by mathematicians that make a very good return based on statistical ratings of horses’ probabilities of winning or placing a race. They are not aiming for headline-grabbing returns, merely a 150% to 300% return on their season’s investment. This is not to be sniffed at of course – an initial investment of £500,000 among the syndicate members is fairly average – but it’s a different game from the lottery boys.
The most famous horseracing syndicate worldwide concentrates on the action in Hong Kong. The territory’s punters bet fearsome amounts – they turnover more per race at Sha Tin racecourse than the UK bookies do in a busy week – into the betting pools, which pits punter against punter. With the aid of statistics, the Hong Kong Racing Syndicate makes a fantastic return from picking out good price winners that the public ignores. They particularly like “exotic” bets, where you have to pick the first three horses home in any race for two successive races – bets which can pay huge amounts when unfancied horse make the frame.
Run by a New Zealander based in London, the syndicate has endless problems placing its bets. The Royal Hong Kong Jockey Club is not keen on their action as they think it detracts from others’ enjoyment of the betting opportunities. But despite this, their returns from the initial $25 million HK dollars (£2.21 million) over the past two years have been 300% and 150%, with the current season running at 118% after six weeks of operation.
Should you join a betting syndicate? My personal experience is that, run by the right people (ie ridiculously overqualified PhD physicists who should be working on the derivatives desk of an investment bank instead of footling about on the horses), then it’s great. Otherwise, the joys of Treasury bonds may be a better path to early retirement.
Written by Joe Saumarez Smith on 21 Jan 2002
Posts: 105 | From: Between the Hedges | Registered: November 07, 2001
AT some point in their lives, most people dream of winning the lottery. But few people go as far as to buy every possible winning combination in a bid to guarantee they will scoop the jackpot.
But whenever there is a huge lottery jackpot anywhere in the world, you can be pretty sure that is exactly what will happen. If the mathematicians and statisticians show the chances of winning a huge payoff is right, then the betting syndicates move in.
Around the world their strategies differ but a common theme is that they find a small shop with a lottery terminal and then buy it from an astonished shopkeeper. They shut the shop to the general public, connect the lottery to their computer and start buying every combination possible. Soon the shop is knee deep in lottery slips as the syndicate tries to cover the 14 million or so potential combinations before the draw. A week later they sell the shop back to the owner at a substantial loss – and leave with a few million in local currency.
If this seems fanciful – or insane – you only have to look at the Australian syndicate led by Stefan Mandel. They managed to keep their existence relatively secret until the syndicate hit the big one, a single ticket which paid $27 million in the 1992 Virginia State Lottery in the USA. It was the fourteenth big lottery win engineered by Mr Mandel and, as it turned out, his last major coup.
Simply explained, his syndicate waited until a lottery anywhere in the world had rolled over its jackpot for weeks on end. When the jackpot was, say, £20 million, but there were only 8 million possible winning combinations, his team would move in and start buying. Mathematically they calculated they could make between 120% and 400% return on their money, depending on the numbers drawn. If a popular series of numbers came out – numbers under 31 are played far more often than numbers over 31 because people choose their friends’ and families’ date of births – they would win less, but they would still be ahead on their investment.
What Mr Mandel had not realised is quite how peeved the Virginian authorities would be. They did not expect their largest ever jackpot to be exported and launched an enquiry. Their investigations found that 35 agents purchased hundreds of thousands of tickets but that even a team that size was unable to cover the 7,059,052 possible combinations of tickets, so that when shortly before midnight on 15 February, 1992, the numbers - 8, 11, 13, 15, 19 and 20 – were drawn, the syndicate were more than mildly concerned that they had bought five million tickets in vain. Fortunately, they had covered enough bases and held the winning ticket.
There the luck pretty much ran out. The taxman stated that a 30% tax on gambling winnings should be imposed, as it was a professionally-orchestrated operation rather than winnings by chance. The CIA, FBI and Internal Revenue Service in the United States, and the Australian Securities Commission, National Crime Authority and the Victoria Police gaming squad all became involved, although no wrongdoing was proved. The members of the syndicate fell out, Mandel fled to his native Romania and in August 1995 was declared bankrupt, with debts in excess of A$500,000.
Not all betting syndicates hit such big jackpots or such bad luck. In the UK I can think of four horseracing syndicates run by mathematicians that make a very good return based on statistical ratings of horses’ probabilities of winning or placing a race. They are not aiming for headline-grabbing returns, merely a 150% to 300% return on their season’s investment. This is not to be sniffed at of course – an initial investment of £500,000 among the syndicate members is fairly average – but it’s a different game from the lottery boys.
The most famous horseracing syndicate worldwide concentrates on the action in Hong Kong. The territory’s punters bet fearsome amounts – they turnover more per race at Sha Tin racecourse than the UK bookies do in a busy week – into the betting pools, which pits punter against punter. With the aid of statistics, the Hong Kong Racing Syndicate makes a fantastic return from picking out good price winners that the public ignores. They particularly like “exotic” bets, where you have to pick the first three horses home in any race for two successive races – bets which can pay huge amounts when unfancied horse make the frame.
Run by a New Zealander based in London, the syndicate has endless problems placing its bets. The Royal Hong Kong Jockey Club is not keen on their action as they think it detracts from others’ enjoyment of the betting opportunities. But despite this, their returns from the initial $25 million HK dollars (£2.21 million) over the past two years have been 300% and 150%, with the current season running at 118% after six weeks of operation.
Should you join a betting syndicate? My personal experience is that, run by the right people (ie ridiculously overqualified PhD physicists who should be working on the derivatives desk of an investment bank instead of footling about on the horses), then it’s great. Otherwise, the joys of Treasury bonds may be a better path to early retirement.
Written by Joe Saumarez Smith on 21 Jan 2002
Posts: 105 | From: Between the Hedges | Registered: November 07, 2001
