Economist Hacked the Lottery System and Won 14 Times. And Guess What? He’s Sharing His Winning Formula

To give you some perspective on how extraordinary this is, consider the fact that you’re four times as likely to be struck by lightning than to win the lottery. And now you can reflect on the fact that a Romanian economist, named Stefan Mandel, actually won the lottery 14 times. Anyone in their right mind would say that’s absolutely impossible. But on the contrary, it is indeed possible.

Mandel found a way to hack the lottery system and win all those times…legally. He created a formula that essentially worked, considering he’s made millions around the world and lives in a beach house on a remote island. And his acts changed the lottery laws forever. So if you want to know how he did it, stick around. And we’ll even show you his winning formula.

February 15, 1992

Just after 11 PM on a regular winter day, a ball machine at the Virginia State Lottery HQ spits out the 6 winning numbers on live TV: 8… 11… 13… 15… 19… 20.

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amazonaws.com

A few days later, officials found out that one “person had won not only the $27,036,142 jackpot, but 6 second prizes, 132 third prizes, and 135 minor prizes. The collective worth of the secondary and other prized being $900,000.

That Was Just the Beginning

And that was just the beginning of what would become the most improbable lottery saga in history. And it all started with one mathematical expert who figured out how to hack the system.

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123rf.com

Are you curious as to how he did it? Well, to put it simply, he bought every possible combination. And he used a formula to do it.

Mandel’s story is one of the most bizarre rags to riches tales.

He Was Struggling to Get By

In the late 1960s, young Romanian economist, Stefan Mandel, was struggling to get ahead. It was a time of hardship in Romania, with the oppressive Communist rule, poverty, job and food shortages, and a resulting misery among the population.

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thehustle.co

Mandel was earning a salary of 360 lei (US $88) each month, clearly not enough to support his wife and two children. He needed to find a way to “get some serious money, quickly,” as he said.

He Chose a Different Path

Many Romanians had, out of necessity, turned to crime to bring money home and provide for their families. Working a respectful job just wasn’t enough for many people in the communist county.

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welt.de

But Mandel described himself as a “philosopher-mathematician.” He was going to figure another way out: the lottery. But first, it would mean doing some research.

He had no idea that he would later become a legend.

More Than a Decade

Mandel was no average Joe. He was borderline genius when it came to numbers and he spent every spare minute analyzing theoretical probability papers written by the 13th-century mathematician Leonardo Fibonacci.

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dpa, Frank May

Mandel spent more than a decade researching mathematical theories before winning his first lottery. After years of research, he created a “number-picking algorithm” based on a method he called “combinatorial condensation.”

A Weekend Mathematician

“I’m a weekend mathematician, an accountant without too much education,” he said about himself in a Romanian magazine. “But mathematics properly applied can guarantee a fortune.”

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miamidiario.com

Using his algorithm, Mandel claimed that would be able to accurately predict 5 of the 6 winning numbers, reducing the number of combinations from millions to thousands.

And that’s when he took a big risk.

A Big Risk

With a group of friends and acquaintances, Mandel took quite a big risk by purchasing masses of lottery tickets with the combinations his formula estimated were most likely.

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the New York Times; Bottom: a 1992 Virginia lottery ticket (via NYT Archives)

And, you guessed it, he (and his group) won for the first time. The amount? 78,783 lei (US $19, 300). Mandel alone walked away with $4,000, which was enough to bribe foreign ministry officials and leave Romania.

From the Lottery to a Business

Mandel roamed around Europe for about 4 years, but then chose to settle down in Australia. He planned on gaming the system, but this time in a different way.

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assorted US and Australian newspapers, 1992

To give you an idea of how it works: in the typical lottery, a set of numbers within a certain range are randomly selected. If your numbers match in any order, you win. But the chances of winning are based on the number of possible combinations of these numbers, which means millions of combinations.

But Mandel found a loophole.

Mandel’s Theory

Mandel caught on to something and was able to figure out a loophole in the system. In many lotteries, the total number of possible ticket combinations was a lot lower than the jackpot amount.

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miamidiario.com

We’ll give an example. If a lottery required 6 picks of numbers between 1 and 40, it would mean that there are 3,838,380 possible number combinations. Now what if that same jackpot was $10 million. Mandel’s theory was: buy a ticket for every single combination at $1 each and be guaranteed a win.

He Did Some Convincing

Mandel believed that “any high school math student could calculate the combinations.” His theory may make sense, but what about logistics? How would he get the money to buy all those tickets? And how would he be able to fill out hundreds of thousands of tickets?

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The Age, 1986-7

Mandel wasn’t just a mathematical genius. He was also quite a salesman. He managed to convince hundreds of investors.

And here’s how…

A Lotto Syndicate

Over a number of years working as an insurance agent, Mandel convinced hundreds of investors to pool their money together and essentially make a “lotto syndicate.” He developed a complete automation system.

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Youtube.com

His system incorporated a room full of printers and computers using an algorithm that pre-populated tickets with every combination. Sounds illegal, right? Apparently, it’s not.

Thanks to Computers…

Thanks to computers, Mandel’s process was revolutionized and a lot easier. Before, he had to write out millions of combinations by hand. And if there was one single mistake, it could ruin 8 months’ worth of work.

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AFP Photo/Miguel Medina (Getty Images)

It was the 1980s, and Mandel’s lottery group would wait until a jackpot ballooned to an amount higher than the total combinations. They would then buy thousands of tickets. They won 12 lotteries (and $400,000 in smaller prizes) across Australia and the UK.

He was on a high, but things were going to go sour.

He Silenced the Naysayers

Mandel told a Romanian newspaper at the time: “Everyone said to me: You cannot, you will not succeed! Now, the voices that have long [cast me as] a dreamer have been silenced.”

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AAPImage

But Mandel’s system hit a wall. In 1987, he won $1.3 million, but pocketed $97,000 after paying taxes and investors. His repeated wins also got the attention of Australian lottery authorities, who changed the law multiple times because of Mandel.

He Changed the Law

By the end of the ‘80s, Australia outlawed both computer-printed tickets and bulk buying of tickets by an individual. All because of one man and his formula.

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Photo credit should read SAUL LOEB/AFP/Getty Images

Mandel had to think differently and aim higher. And what he ended up doing would eventually make international headlines and leave lottery officials around the world dumbfounded.

He Was Going to Virginia

With the money he made on his profits, Mandel planted “scouts” all over North America in places like Montreal, Boston, Miami, Phoenix, and Norfolk. He then made a list of historical lotteries with jackpots that were at least 3x the total of all possible combinations.

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lotterycritic.com

After considering Massachusetts with its $37 million jackpot to 9 million combinations, and Arizona $11 million jackpot to 5.1 million combinations, he was then pointed towards the direction of the Virginia Lottery.

Virginia, Hold on to Your Hats

Why the Virginia lottery? Because it offered some advantages. It was new, so buyers were able to purchase tickets in unlimited quantities and print them at home.

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belfastvibe.com

And the most important advantage: its numbers only ranged from 1 to 44 (whereas other states went up to 54). So with 6 picks, there were only 7,059,052 possible combinations. That’s compared to the usual 25 million.

You’ll be amazed at how many investors he managed to recruit.

The Demand Was High

Mandel set up a trust fund called the International Lotto Fund (ILF) with the Pacific Financial Resources and convinced 2,524 investors to each fork out at least $3,000.

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worldation.com

Having seen Mandel’s prior successes, investors were more or less trusting and willing to join his forces. He managed to raise more than $9 million.

He Started a Business

In a warehouse in Melbourne, Mandel set up 30 computers and 12 laser printers. He hired 16 full-time employees to print 7 million tickets pre-populated with every combination.

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Photo credit should read PIERRE-PHILIPPE MARCOU/AFP/Getty Images

This process took 3 months. Afterwards, he then shipped the tickets, weighing one ton, to a point-person in the US at a cost of $60,000.

And then he waited…

The Waiting Game Begins

Now that the tickets were in Virginia, Mandel had to wait until the jackpot hit a number that would make financial sense after calculating all the taxes, overhead, and investors.

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Photo by Michael Williamson/The Washington Post/Getty Images

Lottery prizes typically start in the low millions and increase every time a drawing is called with no winner. Mandel had to predict what time to strike, and hope for the best that there wouldn’t be multiple winners, which would weaken the jackpot and ruin his profits.

A Few Days Before the Win

Remember the beginning of the story? When he won that first lottery on February 15, 1992? Well, a few days before that, on February 12, the Virginia Lottery jackpot hit $27 million.

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Photo credit should read PIERRE VERDY/AFP/Getty Images

Mandel jumped on it and said to his team: go.

Nobody would have predicted what would happen next.

With Risks Come Consequences

Mandel aimed high, and sometimes high risks have dire consequences. While he managed to hack Virginia’s lottery, his stunt eventually landed him in prison for 20 months.

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ppic.org

Mandel’s scheme was legal at the time, but new laws in the US and Australia changed so that Mandel’s method is no longer possible. You can’t buy lottery tickets in bulk and print your tickets at home anymore.

A Matter of Logistics

The method of buying all the combinations was a logistical challenge. Tickets could be legally printed at home, but they still had to be processed by being taken to an authorized lotto retailer in the US and paid for.

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worldation.com

As you can imagine, the typical act of walking into a gas station with 7 million tickets and a truckload of cash wasn’t an option. Mandel hired accounting firm, Lowe Lippmann, to transfer $7.1 million in investor funds to Crestar Bank in Virginia.

Meet Anithalee Alex

He then set up advance deals with Virginia retail chains to buy the tickets in bulk. All he needed was someone on the ground to do the dirty work. So he turned to an associate named Anithalee Alex.

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How’d They Do That?’, 1992

Anithalee Alex was an ex-paratrooper turned Rolls Royce salesman turned oil prospector and was Mandel’s man on the ground in Virginia. He wore a gold Rolex and a safari suit, and was the typical shmoozer who could “make the world seem like a bed of roses.”

His Old Pal, Mandel

He was often be seen touring around his small town of Teutopolis, Illinois, in a t-shirt that read: “Please Lord, let me prove to you that winning the lottery won’t spoil me.”

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Etsy.com

One day, his old friend Mandel called him up, at a time when Alex was fresh out of bankruptcy court, with $400,000 in debt and 16 maxed-out credit cards.

You could say he was desperate and ready to pounce on the task.

A Difficult Job

Alex’s job was stressful, to say the least. He had to coordinate the drop-off, payment, and processing of 7 million lottery tickets at hundreds of stores across the state of Virginia.

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Justin Sullivan/Getty Images

The jackpot hit $27 million on a Wednesday and the next draw would be on Saturday. So Alex had 72 hours for him and his team to pull it all off.

A Logistical Nightmare

On February 12, 1992, Alex checked into a Holiday Inn in Norfolk, Virginia to set up a “command center” at the Koger Center which was a nearby business park.

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worldation.com

It was an 88-acre maze of buildings in which Alex assembled a team of 35 couriers (mostly certified accountants) and distributed cellophane-wrapped bundles of 10,000 tickets with stacks of $10,000 cashier’s checks.

Like an Office Pool

Ever entered a lottery pool at your office? Well that’s what Alex considered it. “Think of it like an office pool,” he said later, “except a larger office pool.”

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worldation.com

For two long days, the couriers methodically went to 125 gas stations and supermarkets. Store clerks were asked to buy and process millions of algorithmically-generated lotto tickets.

But where was Mandel in all of this?

Meanwhile in Australia…

Back home in Australia, Mandel was eagerly and anxiously waiting while his team orchestrated his master plan.

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worldation.com

“We thought they were nuts,” Rick Miller, a local gas station worker reported. “But if someone comes up and says they want to buy 700,000 lottery tickets, we’re not going to chase them away.”

Disaster Was About to Strike

A worker at Farm Fresh bought 2.4 million of Mandel’s tickets, saying this: “For someone to try to do this ticket-by-ticket is a very chancy proposition. But that’s what lotto’s all about.”

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onelotto.com

Nearing Saturday evening, the team was almost done the task. But then one of the chains who bought tickets in bulk got overwhelmed and ended up quitting in the final hours, literally leaving millions of combinations on the table.

It All Comes Down to Luck

The deadline to enter the tickets came and only 5.5 million of Mandel’s 7 million tickets had been processed. That’s 78%. Now Mandel’s plan was in jeopardy. His method relied on securing every single possibility. But that didn’t happen.

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Youtube.com

It goes to show you, that like any lottery, winning the jackpot would ultimately come down to luck.

So now, Mandel’s scheme was up to chance. What happened next?

A Game of Chance

Without 100% of the combinations secured, Mandel’s strategy would be reduced to a multi-million dollar game of chance.

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mechanictomillionaire.com

Even if he were to win the jackpot, there was a high chance of multiple winners. And that would significantly dilute the earnings.

They Won

It’s 11:20 PM on February 15th, and the numbers are being drawn on live television. In a warehouse, Alex and his team frantically went through 5.5 million physical copies of receipts, searching for the winning ticket.

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krbe.com

Then there was a victorious shout: they won. Their victory made international headlines.

And a chain of events was about to begin.

The Winning Ticket

“When the $27 million ticket came up, everybody was 6 feet off the ground,” Alex said. “It was the most incredible thing in the world.” The winning ticket was purchased at a Farm Fresh in Chesapeake.

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pressherald.com

From his home in Australia, Mandel sent out a message to his team of 2,524 investors: “One of our target lotteries did jackpot to our required level. We entered and won.”

Virginia Had Other Plans

The $27,036,142 jackpot (and $900k in secondary prizes) had to be paid out in 20 annual installments of $1.03 million. At least that was the plan. Virginia’s lottery officials had other plans.

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LottosOnline.com

Yes, what they did was completely legal under both US and Virginia state law, but the Australian group’s stunt was interpreted as an effort to “cheat” the traditional lottery system.

A Legal Battle

“We might remember Thomas Jefferson’s view of a lottery,” Virginia Lottery director Ken Thorson stated to the press. “It is an opportunity for the common man to spend a small sum for the possibility of a higher prize… We never anticipated a group trying to make such a large purchase.”

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thehustle.co

Mandel was about to embark on a 4-year legal battle, where he was personally investigated by 14 international agencies, including the CIA, FBI, IRS, National Crime Authority, and Australian Securities Commission.

He Became a Legend

At the end of the day, neither Mandel nor the ILF was found guilty of any wrongdoing. “I will live to be 150. I am not the type of person who lays down and dies because some glorified clerk doesn’t know what he’s doing,” Mandel reported.

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Twitter

Meanwhile in Australia, Mandel became a legend. There was even a cartoon which portrayed him as a kangaroo hopping out of the US with a pouch full of cash.

But the Future Wasn’t So Bright

The future had a dark cloud coming. Four years after the Virginia win, Mandel’s investors were still looking for their “phenomenal returns.”

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onesourceaccounting.com

The investors comprised of small business owners, machine operators, housekeepers, and doctors. And they were all enticed by stories of jackpots and promised participation in up to 9 lotteries per year. Yet, they only received a $1,400 return on their $4,000 investment.

A Pretty Consultant Fee

Mandel paid himself a one-time “consultant’s fee” of $1.7 million, and sold the annuity on the 20-year payout to a US insurance company for a lump sum of $14 million.

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truvest.co

Records show that Mandel directed the cash into the Pacific Basin Fund, which is a Hong Kong-based account managed by his brother-in-law. “What we calculated to be the reality has changed,” he wrote in letter to investors in 1994. “It may not seem such a hot investment now.”

A Dark End

He tried to launch a life insurance company and a lottery system in the British territory of Gibraltar, but failed. In the end Mandel declared bankruptcy in 1995. He then spent the next 10 years trying to run investment scams.

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thinkglink.com

And that’s how we get to his 20-month prison sentence in Israel.

So what happened later?

On a Remote Island

Today, Mandel lives on a beach house on a remote tropical island in Vanuatu, off the coast of Australia. He says he “retired” from the lottery.

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worldation.com

What about Anithalee Alex? He’s also off the grid and keeps a low-profile existence somewhere in Illinois. “You could not have written a script as good as this,” he said years later. “This is one time real life was better than fiction.”

His Legacy Lives On

Here’s Mandel’s formula, as we promised.

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The Hustle

His legacy lives on in US legislation. All the 44 states that run lotteries have changed their laws to prevent the replication of Mandel’s scheme. Therefore, Mandel was the first and last man to ever successfully game the lottery by buying every possible combination.