Couple Won $27 Million in Lottery Using Math

In 2003, a lottery game is released in the United States: Cash Winfall.

Although this particular lottery is different from the usual lotteries at the time, it’s quite simple. 

One has to pick six numbers between 1 and 49. 

Guessing two, three, four, or five numbers correctly means a prize in increasing amounts.

And if one is lucky enough to guess all six numbers right, they get their hands on a minimum $2 million jackpot.

But that’s not it.

If nobody wins the prize, the lottery purse increases every week, and when the jackpot hits $5 million, the lower-tier winner wins bigger prizes than usual.

The State Lottery makes a mistake by mentioning the odds of winning associated with each combination of numbers, and a couple takes advantage of this loophole by using simple math.

This is the story of Gerald and Marge Selbee, who found a smart way to fool the lottery system and win $27 million!

Jerry and Marge Selbee - An Ordinary Background of An Extraordinary Couple

Jerry and Marge lived in the small, quiet town of Evart in Michigan when they found a way to fool the lottery system.

The factory town had a population of just 1900 when the couple moved in there, with a single stoplight and little to do for the residents. 

However, their story began someplace else: Athens High School, Michigan.

The couple met for the first time in school, fell in love, and decided to marry.

Jerry Selbee was dyslexic, meaning he had a learning disorder and faced difficulty reading due to issues with identifying speech sounds and learning how to relate different letters and words.

Although Jerry didn’t score well on his reading assignments, he had the brains to compute mathematical problems at a very advanced level. 

Jerry was a puzzle solver who saw puzzles, ciphers, and patterns in everyday things. 

His journey with decoding numbers started in 1966 while working as a materials analyst at Kellogg’s factory in Battle Creek, Michigan.

Jerry’s job description included designing boxes that could increase the shelf life of freeze-dried foods and cereals.  

His office was in the factory where cereals were cooked. Since he was the box designer for Kellogg, he always kept a stash of cereal boxes for his company’s competitors to get a better idea of how they designed their boxes.

Jerry would use the lab in the factory to dry, heat, and weigh the contents of cereals by other companies and then compare those results with Kellogg’s cereals, such as Froot Loops. 

One day, Jerry notices a string of numbers and letters stamped on a General Mills box. It was a common practice among companies as stamping a cereal box made it easier to track the shelf life of a box. 

Jerry wanted to see if he could make sense of the numbers on the cereal boxes of Kellogg’s competitors, and he did!

However, Jerry’s manager didn’t consider his discovery special, so it was swallowed and digested without fuss.

But Jerry didn’t mind his manager’s reaction as he was just happy that he had deciphered something that no one could before him.

Jerry was always curious about things and couldn’t rest until he learned everything about a certain topic.

To quench this thirst for knowledge, he enrolled in night classes at Kellogg Community College. 

Over the next few years, Jerry would get a number of different diplomas, which included an associate’s degree from Kellogg or the “Cornflake U” as famous around the town, a bachelor’s degree in mathematics and business from Western Michigan University, and an MBA degree from the same university too.  

He even enrolled for a master’s in mathematics but couldn't pursue it due to family duties. 

Jerry made his kids participate in his obsession with numbers, too. 

For example, when Doug, Jerry and Marge’s oldest son, was in high school, Jerry asked him to assist in counting the rolls of coins he had collected. 

At the time, people rolled up their spare change and exchanged it for cash at the banks.  

Jerry thought if he purchased those rolls from the bank at face value in hopes that the bank hadn’t checked the coins, he could find some rare coins in the rolls.

Jerry’s assumption was right, and the father-son duo made nearly $6000 by simply buying rolls of coins from banks at their face value. 

Talking about his father’s curious side, Doug later said,

“Anything he jumps into, he jumps into one hundred percent. He gets interested in string theory and black holes, and all of a sudden, you’re surrounded by all these Stephen Hawking books.”

From Employee to a Business Owner

Jerry worked at the Kellogg factory, designing cereal boxes for a few years until one day, he decided he didn’t want to work for other people anymore and instead wanted to run his own business. 

After consulting with each other, Jerry and Marge decided to open a convenience store in Evart, Michigan. 

It was the perfect place to start their business.

The town had less than 2000 residents, most of them workers at the two factories that provided parts to Chrysler and General Motors. One McDonald’s, one Subway, but no Starbucks. 

Despite being remote and cold and 120 miles from Battle Creek, Evart saw a steady customer base thanks to the town’s auto factories.

Jerry, Marge, and their kids moved to a house less than a mile from their convenience store called the Corner Store. 

Before moving to Evart, Marge supported her husband as a housewife like most American women at the time. But she also joined him at the Corner Store after they opened it. 

They started this new phase of their life in 1984 and continued for nearly two decades.

Jerry and Marge had a fixed routine for the next decade and a half. 

They would get up early in the morning, open the Corner Store at 7 am, and serve their customers till midnight.

So much so that the Corner Store stayed open even on Christmas when the whole of Evart was closed, including the town’s only grocery store.

Both the partners had divided their roles in their convenience store.

Marge handled books, stocking the shelves, and handling impulse items.

On the other hand, Jerry was responsible for making purchases for the Corner Store, including cigarettes and liquor. 

But this monotonous routine didn’t take away Jerry’s interest in math and puzzle-solving.

And he made great use of these skills to earn as much profit as he could.

For example, the cigarette companies at the time gave the store owners a $2 discount per carton for their shelf space. 

Jerry thought of purchasing the cigarettes from companies at wholesale rates, marking them up by $1, and then selling them to smaller retailers who didn’t get any discounts. 

It was a genius idea and made Jerry a handsome amount of money.

Things were going well for the couple, and they slowly became popular in the town because of their convenience store.

Jerry and Marge also knew almost all their regular customers by name and kept introducing new items in the Corner Store to attract more people.

That’s why, in 1985, Jerry stumbled upon the idea of installing a lottery machine in the store. 

The first installation was a maroon-colored lottery machine that printed Michigan’s state lottery tickets.

Evart had never seen a lottery machine before, so it was natural that the word got around fast.

More and more people started visiting the Corner Store to play the lottery games.

Jerry had 18 different instant games and the state of Michigan gave him a 6% commission on every sold ticket.

Not only this, if any of the winning tickets got cashed at the Corner Store, Jerry and Marge would get a 2% commission for them too. 

Jerry knew this new addition to his business had the potential to earn the couple good profit.

So, he advertised in the local newspapers to attract more buyers of the lottery tickets. 

He had a brilliant mind that worked at full capacity when it came to maximizing sales at the Corner Store.

If ticket sales of a particular game decreased, Jerry would tape shiny pennies to the tickets and tell his customers that the pennies would bring them luck in the game.

Similar to everything else he did, this strategy, too, worked every time he used it.

And it was because of his sharp mind that Jerry was soon earning a profit of $20,000 per year from the sales of lottery tickets. 

Despite selling cigarettes and liquor every single day, the couple neither smoked nor drank. 

They avoided the lottery, too. Jerry would sometimes buy just a couple of tickets to enjoy making sense of the math involved in the phenomenon. 

The business boomed over the next few years, and they even hired a clerk to manage the lottery machine.

Jerry and Marge enjoyed their time as business owners for more than 15 years until one day, in 2000, they decided to retire. 

They sold their business and started adjusting to a different phase of their lives.

Jerry would hang out at the town’s only Subway in the evenings and sometimes would stop at the Corner Store to chat with the new owners.

New Lottery Game, New Luck

Things went like this for the next three years, and then a new lottery game was introduced by the State Lottery.

On a regular morning, Jerry was visiting the Corner Store when he saw a brochure for the new game.

It was called Winfall. 

The ticket price of the new game was $1, but what caught Jerry’s attention and interest was how the game was structured.

From 1 through 49, the players picked six numbers. 

The Michigan State Lottery then drew random six numbers, and the players had to see if their numbers matched the ones picked by the State Lottery.

Guessing six numbers correctly won a player the jackpot, which was a minimum of $2 but mostly a higher amount.

If a player managed to guess five, four, three, or two of the six numbers, the amount of the prize became lesser.

While others purchased tickets for Winfall, hoping their luck would win them the jackpot one day, Jerry became interested in an unusual gimmick by the game: Roll-down.

In Winfall, the jackpot kept increasing if nobody won, and a roll-down came into play when it reached $5 million.

During a roll-down, the jackpot money was distributed among the lower prize tiers, increasing their winnings.

While other states had lottery games with roll-downs, none were as structured as Winfall's. 

Roll-downs occurred approximately every six weeks and were a significant event, announced by the Michigan Lottery as a promotional strategy to attract more players. 

As a result, bettors often increased their bets in hopes of winning a greater share of the jackpot.

The brochure of Winfall outlined the probabilities of different correct guesses.

Jerry noticed that there was prize money.

Similarly, to correctly guess four numbers and win  $100, Jerry had a 1-in-1500 chance. 

His interest in math was proving beneficial to him because when he did a few more calculations, he realized that if a player waited till a roll-down had more chances of winning than losing on average.

But this would work as long as no one guessed all six numbers correctly.

With the jackpot increasing, each successful three-number guess would result in $50 for the player instead of $5, and the four-number winners would make $1000 instead of $100. 

Once he was done calculating, Jerry knew that buying a $1 lottery ticket was worth more than its purchase price during a roll-down week. 

After figuring out the odds of getting a profit on lottery tickets, Jerry had another important question in mind: how to hide his new venture from his wife.

Since he himself wasn’t sure if the numbers he had calculated were actually correct he decided to test his theory on paper first, but in complete secrecy.

During a roll-down week, he picked numbers, and when the State Lottery drew, Jerry counted his theoretical winnings.

He had made money, and his theory appeared to be working.

After testing his theory, there was only one thing for Jerry to do now: play the real lottery.

So, when the State Lottery announced the next roll-down, Jerry drove 47 miles northwest of Evart to a convenience store in Mesick to buy the tickets.

The reason for not getting tickets from Evart was that people knew him there, and Jerry didn’t want anyone asking him questions about why he was buying so many tickets.

Because he was actually going to buy an unusual number of tickets: 2200. 

Yes! Jerry spent $2,200 on Winfall tickets and stood at the machine to let the computer pick numbers from him. 

The State Lottery drew six winning numbers after a few days and it was time for Jerry to see if his theory had worked in reality too.

In the next few hours, Jerry sorted all of his 2200 tickets and started circling all the two-, three-, and four-number matches.

He didn’t get any five-number matches.

When Jerry was done sorting all his tickets and matching numbers, he calculated his winnings to be $2,150, just $50 less than what he had spent on the tickets. 

Anyone lacking confidence would not have stopped trying their luck at this point.

But Jerry was only thinking numbers.

After some more calculations, he realized he risked too little money to get the profits he was aiming for.

He just needed to buy more tickets because that gave him a better chance of aligning his results with the statistical odds.

So, when the next roll-down week arrived, Jerry went back to the same convenience store in Mesick and bought 3400 tickets, 1200 more than the last time.

Fearing that his wife would discover his secret if he took those tickets home, Jerry sorted all the tickets in the convenience store. 

And when he was done counting, the results made him happy.

He had won $6,300 this time, a 46% profit margin.

He now knew he had cracked the Winfall code, and that began one of the most interesting stories of all time.

On the next roll-down, Jerry bet $8,000. 

He knew he was going to make a profit; the only question was how much.

When he was done sorting the tickets, the winnings amounted to $15,700. This time, the profit margin was 49%.

Back-to-back winnings proved that Jerry’s theory was correct, and it was now time he told his life partner about it.

While on a vacation in Alabama, Jerry lets Marge in on his secret.

His wife’s response was nothing but a smile because she had seen the extraordinary puzzle-solving capabilities of her husband over the years.

Jerry never thought of informing the Michigan State Lottery about his Winfall discovery because he assumed the state already knew about the game’s vulnerability to exploitation. 

For him, the flaw was probably intentional to encourage players to spend more and more money on the game, resulting in more revenue for the state because Michigan took 35 cents on each ticket sold.

Jerry’s logic was that he wasn’t manipulating the system but rather just buying more tickets than other players at certain opportune moments because his tickets had the same probability of winning as anyone else’s who was playing Winfall. 

Before revealing his secret to Marge, Jerry alone had to spend hours at the lottery machine to print the tickets.

But, now both husband and wife took up this tiring and time-consuming task.

The good thing was that all the convenience store owners were their acquaintances, so no one really asked them why they had developed a sudden interest in the lottery and why they were printing so many Winfall tickets. 

Their routine was simple: print thousands and even hundreds of thousands of tickets, wait for the drawing, get together in their living room, and sort the tickets according to their value. 

Once done, they would recount to make sure they didn’t miss anything.

While it seemed boring to their children, the couple enjoyed the process and always wanted the next roll-down week to come in the blink of an eye.

Like other states, the Michigan State Lottery also allowed the formation of large betting groups to get more people into playing. 

So, in the summer of 2003, just six months into cracking the Winfall code, Jerry and Marge asked their children if they also wanted to earn through the lottery.

The kids chipped in and the family wagered $18,000 as their first bet together.

Unfortunately for them, a player hit the jackpot that week, and the Selbees and their kids lost almost all of their money.

The kids, who were already doubtful about their parents' theory, lost confidence, but Jerry told them it was just bad luck and the good days were coming.

They believed him once more, and within two weeks, everyone was in profit.

In June 2003, Jerry and Marge created a betting corporation, GS Investment Strategies LLC, that eventually expanded to 25 members, including a parole officer, a state trooper, three lawyers, and a bank vice president. 

By the spring of 2005, GS Investment Strategies LLC had bet on 12 roll-down weeks, increasing the winnings each time.

They first won $40,000 in profits, which increased to $80,000 during the next roll-down week and $160,000 in the roll-down week after that.

Everything was going well until, in May 2005, the Michigan Lottery suddenly shut down Winfall, citing decreasing ticket sales.

Jerry, Marge, and the shareholders in the GS Investment Strategies LLC were disappointed when they heard the news. 

Apart from making money, Winfall had also given these players a purpose. 

While Jerry was figuring out his future plans, one of the members of his lottery group emailed him that Massachusetts had recently introduced a similar version of Winfall by the name Cash Winfall. 

However, there were a few differences. The ticket price was $2 instead of a dollar, the range for picking numbers was from 1 to 46 instead of 49, and the jackpot rolled down after hitting $2 million instead of $5 million in the case of Winfall. 

But there was a problem: Massachusetts was more than 700 miles from Evart, and Jerry didn’t know any store owner in the state who would let him print thousands of tickets without asking questions. 

But, he soon got contact details of a convenience store owner in Massachusetts from the same person who had informed him about Cash Winfall initially.

One day in August 2005, Jerry decided to give the Cash Winfall a try and started a 12-hour long drive to the East Coast in his gray Ford Five Hundred.

The Massachusetts State Lottery had a strict system in place to monitor the sales of tickets and detect anomalies.

An agent had to get a special waiver if they sold more than $5,000 in tickets per day.

Lucky for Jerry, the convenience store owner whom Jerry’s friend had told him about agreed to let him print tens of thousands of tickets in exchange for a stake in GS Investment Strategies LLC.

In their first time playing the Cash Winfall, Jerry and Marge bought 60,000, amounting to $120,000, which increased to as high as $720,000 bet on a single drawing during a roll-down week.

The Massachusetts State Lottery didn’t have any problem with how the Selbees were going about their business, which encouraged the couple to keep playing the game the way they were playing it.

By 2009, the Selbees had made a net profit of $5 million after taxes and other expenses. 

All these years, only once, in April 2010,  were they checked in by a lottery official while printing tickets, but he reported to his seniors that everything was organized and running smoothly. 

Their kids and friends also took advantage of their scheme and won huge profits.

Jerry had a simple rule: keep playing conservatively to avoid attracting undue attention.

But he wasn’t the lone horse in the race. Other people, particularly a group from MIT, had also decoded the flaw in the Cash Winfall and were betting huge amounts on every roll down.

End of a Successful Run

In June 2011, Andrea Estes, an investigative reporter with the Boston Globe, got a tip from a state employee that something unusual was happening with the lottery.

Estes got her hands on a copy of 20/20, a record of winners who won $20,000 at least 20 times in the previous year.

Upon investigating, she discovered that the Michigan-based GS Investment Strategies LLC was buying hundreds of thousands of tickets at a place called Billy’s Beverages, the store Jerry and Marge used to print tickets. 

She quickly learned everything about the lottery and drove to Billy Beverages on July 12, 2011, right before a roll-down. 

When she entered the store, Marge and Madras, the store owner, were busy printing the lottery tickets.

She asked them a few questions, but they refused to answer.

Estes then drove to a diner called Jerry’ Place and found Jerry there, who was also printing tickets and didn’t answer her questions either. 

Upon reviewing more public records from the State Lottery, Estes discovered that other groups were also doing the same thing as Jerry and Marge.

The lottery officials didn’t seem to bother as if they already knew they were getting screwed until Steven Grossman, the newly installed treasurer of Michigan, came to know about Estes's investigation.

Soon, the lottery officials cracked down on large betting groups and suspended licenses of seven convenience stores, including Billy’s Beverages and Jerry’s Place, the two stores Jerry and Marge had used to print innumerable tickets. 

On July 31, a story titled “A Game with a Windfall for a Knowing Few” was published in the Boston Globe. 

The story took everyone who read it by surprise, with politicians publicly criticizing the lottery’s handling of the game.

National news outlets such as The Washington Post also picked up Estes’s story, adding to the embarrassment of the lottery officials and public servants. 

Two days after the story broke, the Michigan State Lottery announced that the Cash Winfall game would be phased out within a year, and each store would be limited to selling $5,000 in tickets per day. 

Jerry and Marge were also named in the article, which made Jerry furious because they believed they had been portrayed as cheaters, whereas the truth was completely different. 

Jerry, in particular, was furious at the way their story came to light. So he decided to give an interview to Andrea Estes.

He openly talked about how he and his wife got into the lottery and how different groups were doing the real manipulation by forcing the Cash Winfall roll-downs.  

While the authorities were busy investigating the matter, the couple decided to play for as long as possible to maximize their profits.

However, with their two trustworthy partners stripped of their lottery licenses, it became increasingly hard to find a store owner in Massachusetts who would let them print large quantities of Cash Winfall tickets, especially after the article by Andrea Estes.

One store manager even called the police when Jerry tried to explain his system to him. 

Outro

January 2012 was the last time Jerry and Marge ever played Cash Winfall, and when they finally hung their lottery boots, they had grossed as much as $27 million from nine years of playing the lottery in Michigan and Massachusetts. 

The GS Investment Strategies LLC had netted $7.75 million in profit before taxes for the firm’s shareholders. 

Jerry and Marge proved that the lottery was about numbers more than it depended on a person's luck. 

And while the lottery system was too complex for others to understand, for Jerry, it was nothing more than “sixth-grade math.”