Lottery winners often become targets for scammers and criminals looking to take advantage of their newfound wealth. Winning the lottery, while extremely exciting, can also make someone more vulnerable if they are not careful. There are many common scams and predatory schemes that lottery winners may encounter, ranging from fraudulent investment opportunities to fake charities and long-lost relatives asking for money. Being aware of the most common lottery scams can help winners protect themselves and their winnings.
What are some common lottery scams?
Investment scams
One of the most prevalent scams aimed at lottery winners are fraudulent investment opportunities. Scammers may approach winners claiming they have an inside track on a can’t-miss investment or business venture. However, these are almost always too good to be true. The scammer’s goal is to get the winner to turn over as much money as possible, which they pocket while the “investment” flops. Common schemes include fake real estate developments, Ponzi schemes promising ridiculous returns, and start-up businesses the scammer claims will make the winner even richer. Falling for these scams can cost winners their entire fortune.
Predatory lending
Scammers may also pose as lenders willing to provide upfront cash in exchange for the winner assigning over all or part of their future annual lottery payments. While legal lending arrangements like this exist, scammers often charge exorbitant interest rates and fees that end up draining much of the winner’s income over time. Any lending deal involving the transfer of future lottery payments should be carefully reviewed by a financial advisor before agreeing.
Charity scams
For generous winners wishing to donate some of their prize money to charity, bogus charities and fundraisers await. Scammers create convincing charity names, backstories and marketing materials to fool winners into thinking they are giving to a good cause. In reality, the scammer pockets the donations. Winners should research any charity they plan to donate to, looking for reviews and confirmation it is registered as a 501(c)(3) nonprofit organization.
Fake prizes/sweepstakes
Scammers may try convincing lottery winners they have won an additional prize or sweepstakes. This is done to obtain the winner’s personal and banking information. The scammer may ask for things like Social Security numbers and bank account information to process the supposed prize payout. In reality, they use the information to steal the winner’s identity or drain their bank accounts. Winners should never provide personal information for an unexpected prize claim.
Romance scams
Lonely winners looking for love may find themselves targeted by scammers pretending to have romantic intentions. Once they have gained the winner’s trust over weeks or months, they ask for money for supposed emergencies, business needs or travel to finally meet in person. In reality, the scammer disappears with the money. Winners should be wary of anyone expressing interest so quickly after a lottery win.
Long-lost relatives
Soon after winning the lottery, long-lost relatives you never knew existed may come looking for a cut of the money. Con artists research winners and their extended families to make their pleas for help more credible. While not all relatives seeking financial help are scammers, winners should be cautious of anyone they have not previously met coming to them for large gifts or loans. Do your due diligence before providing money to anyone claiming to be a relative.
Lawsuits/legal threats
Scammers may threaten legal action related to the winner’s windfall as a way to extract money. This can take the form of a lawsuit threat from someone claiming business ties to the winner and demanding a cut of the money. Other times, scammers impersonate attorneys or government officials investigating some made up issue with the winnings. Their goal is intimidating winners into paying them money to make supposed legal troubles go away. Winners should consult their own lawyer about any legal threats before taking action.
Tax scams
Fake tax collectors will target lottery winners claiming the winner owes back taxes on their new income. This is done to scare the winner into wiring over money. However, legitimate tax authorities will never contact someone demanding immediate payment over the phone or email. Winners should always consult their financial advisor or accountant about tax implications rather than paying any supposed taxes upfront to someone contacting them out of the blue.
Why are lottery winners targeted?
There are several factors that make lottery winners ideal targets for scammers:
- Their identities and personal details are public knowledge – Lottery winners’ names, hometowns, and sometimes occupation and photo are revealed publicly by lotteries.
- Winners have instant access to large sums of cash – Scammers know winners have the liquid funds readily available to wire or send if pressured.
- Winners are often inexperienced in managing large sums of money – Without financial experience, winners can be more trusting of supposed opportunities.
- Winners tend to be generous and want to give back – Scammers exploit winners’ desires to donate some of their winnings to good causes.
- Winners crave financial security – Scammers know that winners worry about their long-term finances and play upon that fear.
- Winners have complicated tax situations – Confusing tax implications leave winners vulnerable to tax scams.
- Winners want to help friends and family – Scammers pretend to be long-lost relatives or friends in need.
In short, lottery winners present the perfect opportunity for scammers – they have the money, the desire to use it well, and little experience dealing with con artists targeting their wealth. Their lives being changed overnight makes them unprepared to face the dark side of instant fortune.
Real life examples of lottery winner scams
Some notable scams perpetrated against major lottery winners in recent years include:
Harold and Helen Lerner
In 2005, Harold and Helen Lerner of Tampa, Florida won $1 million in the Florida Lotto. Within months, a career criminal named Lou Pearlman swindled the couple out of $300,000 in a fraudulent investment scheme promising 25% returns. Pearlman claimed he was using the money to finance an international record deal. Instead, he pocketed the funds which were never seen again.
Evelyn Adams
New Jersey native Evelyn Adams defied the odds by winning the state lottery not just once, but twice in the mid-1980s. However, by 2001 both her fortune and her marriage were gone. A series of poor investments recommended by a gambling buddy wiped out her winnings. She also lost money in a home repair scam and from giving loans to friends and family that were never paid back. Easy come, easy go.
William Post III
In 1988, William Post III won $16.2 million in the Pennsylvania lottery. His brother hired a hitman in a failed murder plot hoping to inherit some of the windfall. Post ended up nearly bankrupt after being sued by an Atlantic City casino, spending lavishly on strangers and making poor investments. Within a year of his win, Post said the money had made his life worse not better.
Callie Rogers
At age 16, Callie Rogers became Britain’s youngest lottery winner in 2003, taking home 1.9 million pounds. By 2018, Rogers had squandered it all. She spent huge sums on vacations, plastic surgery, luxury cars, drugs and even footing her friends’ bills. She admits she was too young to know how to manage her money and now works as a caregiver making minimum wage.
Janite Lee
St. Louis widow Janite Lee won $18 million in 1993. A decade later her net worth was estimated to be $700 due to gifts and gambling losses. According to reports, Lee provided financial help to several Korean companies, churches and other charities. Her generosity left her with little remaining before she died in 2007. Lottery officials use her as a cautionary tale when advising winners on preserving their winnings.
Tips for lottery winners to avoid scams
While coming into sudden wealth can make someone more vulnerable to scams, lottery winners can take steps to protect themselves:
- Remain anonymous if allowed – Some lotteries let winners form a trust to claim winnings anonymously and avoid publicity.
- Be wary of unsolicited offers – Contact should come from the winner, not the other way around.
- Hire legal and financial advisors – Have professionals handle business matters and investments.
- Live below your means – Don’t feel pressure to spend lavishly or donate huge sums all at once.
- Pay off debts – Eliminate debt obligations you already have before taking on any new ones.
- Set limits on requests for help – Only provide gifts or loans you can afford and set rules about who can ask.
- Pay taxes upfront – Immediately set aside money needed for tax obligations.
- Invest conservatively – Build a diversified portfolio focused on gradual growth over decades.
- Avoid complicated investments – Stick to simple, established products from reputable firms.
- Research before giving to charity – Verify nonprofit status and where donations go.
- Delay big decisions – Wait at least 6 months before making major lifestyle changes.
Exercising caution, being skeptical of too-good-to-be-true offers and having trusted advisors in place can help lottery winners enjoy their wealth for years to come.
Red flags of a lottery scam
Lottery winners should watch for the following red flags that suggest a scam may be afoot:
- You are required to pay money upfront to collect supposed winnings or prizes.
- Personal and banking information is requested as part of a prize claim.
- There is a very short deadline requiring you to act immediately.
- You are pressured to make decisions quickly and secrecy is required.
- Contact is initiated by the scammer, not the other way around.
- Investments promise guaranteed high returns with no risk.
- The scammer tries isolating you from trusted advisors.
- You are asked to pay taxes on lottery winnings upfront by wire transfer or gift card.
- Charities have no verifiable track record, address, staff or 501(c)(3) status.
- Long-lost relatives ask for substantial sums with stories that are difficult to verify.
Any one of these warning signs should make lottery winners stop, seek counsel and avoid proceeding until they can confirm an offer is legitimate. Don’t let scammers rush you into rash decisions.
How to report a lottery scam
If you believe you have been the victim of a lottery scam, report it immediately to prevent others from being victimized. Contact the following:
- Local police – File a police report about any fraud or theft.
- State lottery commission – Most states have dedicated lottery fraud divisions.
- State attorney general – They prosecute consumer fraud.
- Federal Trade Commission – Report scams to the FTC online or by phone.
- AARP Fraud Watch Network – Report scams against those 50+.
- FBI – The FBI has a IC3 unit to receive online scam reports.
Also notify your financial institutions if accounts may have been compromised. Contacting the major credit bureaus to check for any suspicious activity is another prudent step for victims of scams.
Conclusion
While winning the lottery is an incredibly exciting event, winners must proceed with caution when claims, investment offers and requests for money start pouring in. Arm yourself with knowledge about the sneaky tactics scammers use to try separating lottery winners from their cash. Follow tips from financial experts to protect your windfall. If you ever have doubts or feel pressured, just walk away until you can get guidance. Avoiding falls for scams will help ensure your lottery winnings provide security and happiness for many years to come.
