From Legal Loopholes to Inside Jobs: How Lotteries Tightened Their Defences

Author: R. Paul Wilson

Every gambler has fantasised about discovering a method – preferably legal – that somehow launches them on an epic run, transforming fifty dollars into forty million in the blink of an eye. But as any optician will tell you, eventually we all need to blink, and even the most legendary of lucky streaks must end – often in financial disaster. Is there really an elusive method that will beat the casinos at their own game or break the bank at Monte Carlo? Or a secret system to predict the ponies, or even… a way to beat the lottery?

SPOILER: Such methods exist – but not for long.

Beating the lottery is not a myth or an internet rumour; it has happened multiple times.

How Stefan Mandel Legally Beat the Virginia Lottery

In 1992, a syndicate known as the International Lotto Fund (ILF), led by a mathematically gifted Romanian/Australian economist named Stefan Mandel, targeted the Virginia State Lottery in the U.S. and achieved something extraordinary: they legally bought every possible combination for a forthcoming jackpot!

It sounds crazy, but Mandel had successfully deployed this system before, attracting multiple investors hoping to share in a much bigger jackpot because it was grounded in a simple observation, leveraged with solid mathematics and meticulous logistics.

Stefan chose Virginia because its lottery employed a 6/44 format, resulting in 7,059,052 possible combinations, but crucially, the lottery allowed players to print their own tickets, which meant they only needed to be paid for and validated in stores around the state. With the jackpot rolling over for several weeks and exceeding $27 million, and with tickets priced at $1 each, the maths more than favoured Mandel. He and a small army of helpers printed millions of tickets (as was permissible), then physically delivered them to lottery outlets, but this was not exactly an easy process.

The sheer number of tickets that needed to be submitted and paid for created a wave of suspicion among shop owners and lottery vendors, who soon began to refuse players with stacks of pre-printed tickets, thinking there must be some sort of scam at work. This forced Mandel’s team to spread their tickets further afield, seeking out any tiny ‘Mom and Pop’ stores with a lottery machine in a desperate effort to cover every possible winning number.

Despite buying over six million tickets, hundreds of thousands of tickets remained unpaid, meaning that once the lottery closed and the numbers were drawn, there was a dreadful possibility (22%) that the winning ticket might still be in the back of someone’s car, unvalidated and worthless. Given that Mandel had to raise the millions of dollars necessary to buy every number, this meant he might not only lose that money but also face some extremely upset investors.

Luckily, the winning ticket was in their possession, as were several other large prizes, netting an enormous amount once the inevitable legal challenges found Mandel had not broken any rules or laws but for various reasons, this resulted in Mandel and his investors falling out, with no one really happy with the result even though they won $27 million along with several minor-tier prizes and walked away with a substantial profit over time.

Mandel’s Earlier Wins – And How Lotteries Closed the Loopholes

Mandel's win in Virginia was not his first success.

He had previously achieved similar results (for much smaller amounts) in Australia and Europe, always by identifying the optimal moment when jackpots exceeded the cost of covering enough combinations. Yet Mandel was not a solitary figure; he relied on investor networks to raise millions, organise logistics, and coordinate distribution. It was less a case of “one man against the system” and more about “a team running the lottery like a business”. This notion of buying into a winning system has often been exploited for outright scams that pretend to be legitimate methods like Mandel’s but are often just fabricated stories concocted to attract unwary gamblers. More on these another time.

This story not only highlights a loophole in the system – it shows how that loophole was quickly shut down. After Mandel’s win was judged to be legitimate, lottery operators responded by expanding their number pools, drastically increasing the combinations and the cost of buying them all (not to mention the odds against winning). Secondly, by centralising ticket printing and digitisation, they effectively slammed the main door Mandel had been taking advantage of. They also began employing random number generators with audit trails and third-party verification, supposedly strengthening systems against outsiders – but what about insiders?

The Eddie Tipton Scandal: When the Lottery Was Rigged from Inside

In 2011, an inside job rocked the industry when Eddie Tipton, an IT director at the Multi-State Lottery Association, manipulated random number generators to produce known outcomes, installing self-deleting code in machines to secretly win several jackpots paid to close associates. Unlike Mandel, Tipton was eventually apprehended and sentenced – his method relying not on mathematics, but on abusing trust and literally rewriting the game behind his employers’ back. Worse still, Eddie Tipton was not a shadowy hacker or a lottery mastermind in hiding; he was the Information Security Director at the Multi-State Lottery Association (MUSL) – the very group responsible for maintaining the integrity of games like Powerball and Hot Lotto!

In other words, he was the person everyone trusted not to cheat.

Between 2005 and 2011, Tipton exploited his access to the lottery's random number generators, which were running on supposedly secure computers, which were believed to be tamper-proof. He installed self-deleting malware that altered the RNG's behaviour on specific days and times, and when those conditions were met, the machine would produce predictable numbers – numbers Tipton already knew.

But he was not dumb enough to claim those winnings himself.

Instead, he passed the numbers to close associates – his brother Tommy Tipton, a former judge, and his friend Robert Rhodes – who would buy the tickets and collect the prizes. Over the years, the scheme yielded at least five known jackpots across multiple states, totalling over $2 million, but as is often the case, their downfall did not stem from some brilliant investigator, but from human error – Tipton’s chosen confederates were just too close to home. In 2010, a suspiciously anonymous winning ticket in Iowa raised red flags, becoming central to what later became known as the Iowa lottery fraud case, causing investigators to trace the ticket to Rhodes, and through phone records and surveillance footage, Tipton was eventually recognised as his source of the winning numbers.

In 2017, Tipton pleaded guilty to fraud and was sentenced to 25 years in prison.

How Lottery Security Evolved

This scheme sent shockwaves through the lottery world (sounds like a Super Mario level) – not because it was technologically advanced, but because it was an inside job. The very randomness that people relied on had been quietly corrupted from within. Since then, lotteries have revamped RNG protocols, added third-party oversight, and instituted cryptographic audits, so now they are completely safe… apparently.

This illustrates how a gaming exploit crosses the line between clever and criminal and, yet again, proves that even the most secure system is only as honest as the people operating it. Whether it’s Mandel exploiting the maths from the outside or Tipton compromising the code from within, both cases show that every breakthrough in beating the lottery forces operators to build a tougher, more sophisticated defence.

All systems evolve in response to pressure. Whether it’s an economist with a spreadsheet or a crooked programmer with a thumb drive, every exploit compels game operators to adapt in this never-ending cycle of cat and mouse.