The genius of math has managed to play the system – and change the rules of lotto forever

Every year, we go through the archives and republish some of the remarkable business stories of the past year. It is essentially a mix of the most popular, topical or insightful articles published in 2018. Here is one who made the cut.

Romanian economist Stefan Mandel was struggling to make ends meet.

He therefore proposed an unlikely solution: winning the lottery.

But while most people who dream of winning the jackpot count on a foolish chance, Mandel has had other ideas.

The math whiz spent his free time studying probabilistic notebooks written by the mathematician Leonardo Fibonacci. After years of careful research, he has developed a "number selection algorithm" that uses a method called "combinatorial condensation".

According to this method, Mr. Mandel boasted that he could predict five out of six winning numbers, a feat that would reduce the number of possible winning combinations to thousands rather than millions.

With a group of friends, he bought huge amounts of tickets using all possible combinations and eventually won first prize, worth over $ 26,000 A (NZ.

After paying his expenses, he had only $ 5,400 left, but it was more than enough to bribe officials and escape the Romanian communist system, then settle in Australia to start a new life with his wife and his two children.

But his lotto racket was just getting started – and unlike the infamous Eddie Tipton, the American henchman, Mr. Mandel finally won the lottery 14 times without breaking a single law.

Once the family settled in Australia, Mr. Mandel realized that during some random draws, the total cost of buying a ticket to play all the possible combinations was well below at the jackpot price.

For example, if a game required six numbers between 1 and 40, the number of possible number combinations would be 3,838,380, says The Hustle.

If the jackpot was $ 10 million and the tickets cost $ 1 each, Mr. Mandel still had an interest in making a huge profit.

Of course, there were still some hurdles to overcome: raising money to cover the cost of tickets and how to physically fill in each form.

But while he was working as an insurance agent the same day, Mr. Mandel persuaded a group of investors to pool their money to form a lotto syndicate.

He also invented an automation system, with printers and computers using the algorithm to fill tickets automatically using each combination of numbers.

During the 1980s, the union waited for a jackpot to become more important than the total combinations before stealing thousands of tickets.

The group has won 12 lotteries and hundreds of thousands more modest prizes in Australia and the United Kingdom.

But again, there were setbacks: the profits were not high enough and the Australian lottery authorities also took part in the plot, eventually changing the rules to ban computer-printed forms. and loose notes in order to thwart the union.

But Mr. Mandel still had a bold plan B in his sleeve.

With the profits that he had already made, he has implanted scouts across the United States and has also developed a list of previous lotteries with jackpots at least three times higher than the total of all possible combinations.

He focused on the Virginia lottery, whose number varied only between one and 44, which meant that the total number of possible combinations was several million fewer than other games.

He created an official company, Pacific Financial Resources, which also created a trust called the International Lotto Fund.

He persuaded thousands of investors to put cash into the fund and collect millions.

In February 1992, the Virginia lottery reached a jackpot of 27 million US dollars.

Mr. Mandel had already been housed in a warehouse in Melbourne and employed 16 full-time people to print seven million tickets over three months, which he had then sent to a partner in the United States.

The union won the prize, along with an additional $ 900,000 in secondary prizes.

Although Mr. Mandel's method was not illegal, it still raised suspicions and dragged him into a four-year legal battle.

During this period, numerous international agencies, including the CIA, the FBI and the Australian Securities and Investment Commission, have opened an investigation.

He was finally released from all wrongdoing – but while Mandel managed to pocket millions of dollars from his victory, his investors had only received $ 1,400 on their $ 4,000 investment – well far from the promised wealth.

Mr Mandel filed for bankruptcy in 1995 and spent 20 months behind bars in Israel thanks to an investment scam.

These days, he leads a quiet life in Vanuatu, far from the spotlight, although all American states have since passed laws banning the use of Mr. Mandel's strategy.

Despite his epic wager, Mr. Mandel downplayed the risks he had encountered during an interview granted in 2012 to the Romanian newspaper Bursa.

"I am a man who takes risks, but in a calculated way," he told the publication.

"Cutting my beard is a lottery: it is always possible for me to cut myself, catch an infection in my blood and die – but I do it anyway.

"The odds are in my favor."