A Canterbury man behind the country's biggest illegal lottery will not be going to jail but his punishment is yet to be determined.
Waiariki McIlroy-Jones and his company Jonez LRC Ltd were due to be sentenced at the Christchurch District Court on Friday for running schemes that generated $11 million in a year but the judge reserved his decision until June.
The Department of Internal Affairs laid charges against Jones and his company in May 2024 for organising illegal gambling and profiting from the lotteries.
McIlroy-Jones and his company came to Internal Affairs' attention in October 2022 after complaints were made about giveaways being organised by the then-22-year-old.
A summary of facts said Jonez LRC Ltd was formed in June 2021 and until May 2022 was primarily buying and selling used cars.
"However in 2022 the defendants began conducting a lottery with motor vehicles (or cash alternatives) as the prizes. Although the defendants positioned their lottery as a lawful sales promotion scheme, it didn't fully comply with the requirements for a sales promotion scheme. Over time the lottery grew significantly to the point where one of the final prizes on offer was a freehold house or a $700,000 cash prize," the summary said.
"Over 287,000 lottery entries were purchased by an audience of 69,500 unique purchasers over a period of approximately 12 months."
Internal Affairs described the first stage of the offending as the "poster package scheme" where entrants would buy a poster for $30 to obtain entry into draws for cars or cash.
The "posters" were downloadable JPEG images.
By 2023 McIlroy-Jones changed to a loyalty rewards club model where entries to lotteries were linked to a graded "membership" offering discounts to about 40 merchants in six cities across New Zealand.
"A customer would purchase a 'package' of a specified value which would entitle them to a specified number of entries into an upcoming lottery. However the lotteries increased in frequency with the defendants often conducting multiple lotteries per week and the value of the prizes increased. For example, on 26 May 2023 a giveaway was run with prizes of either a Toyota Land Cruiser plus a caravan or alternatives of the Land Cruiser plus $95,000 or $235,000 cash," the summary of facts said.
"On 7 July 2023 a giveaway was announced for a freehold, mortgage-free house in Rangiora. The alternative prize was $700,000. This was the largest prize that JLRC had attempted to give away.
"A purchaser did not receive any information about how the membership itself actually worked. It was often unclear how to redeem their membership or to confirm to the shop partners that he was a member. The email did not state what type of membership they had purchased or when it would expire."
McIlroy-Jones and his company ran 29 giveaways under the scheme between April and July 2023.
The final two giveaways, for the house and a Nissan Safari, were interrupted before winners could be drawn.
The two schemes generated sales of $11.12 million between June 2022 and July 2023.
McIlroy-Jones had paid himself a shareholder salary of $180,000.
"When interviewed Mr McIlroy-Jones maintained that the lottery was a lawful sales promotion scheme," the summary said.
McIlroy-Jones and his company pleaded guilty in January.
'He's not going to prison'
The 25-year-old appeared briefly at the Christchurch District Court on Friday but Judge Raoul Neave said it was a complex matter and he had more to consider.
"I think I can say now without any great difficulty he's not going to prison. It's just a question of what else I do with him," he said.
"It's not a situation where the defendant has tried to hide it. He's made some terrible calculations which has seen him end up in this position."
Judge Neave said it was also not a case of McIlroy-Jones misleading people participating in the lotteries.
Participants were paying for the chance to win and "in that sense they are getting what they paid for", he said.
McIlroy-Jones' lawyer Kathy Basire said her client had sought and been provided poor legal advice before embarking on the venture.
He had also run a "bonafide business" buying and selling cars and merchandise related to cars that appealed to the "boy racer crowd", she said.
"Here, in essence, the profit will go back to the government. While the turnover was large, the majority of money was paid out in prizes and then operating expenses," she said.
"Mr McIlroy-Jones did not profit much at all. In fact he could have legitimately, had he sought a licence to run something like this, paid himself a salary with the profits going back to the community.
"This is not someone who took the money and used it for his own benefit with overseas holidays or a luxurious lifestyle."
Judge Neave agreed with her assessment.
"The biggest loser in this will, in fact, be him because there will be some legitimate assets that are likely to be caught up in the forfeiture," he said.
Internal Affairs lawyer Chris White said Jones had attempted to exploit a loophole by claiming he was running a sales promotion scheme when he was promoting a chance to win prizes.
Gambling for prizes of more than $5000 can only be run by a not-for-profit society and requires a licence to ensure the integrity of the operation and protection of participants.
Internal Affairs director gambling Vicki Scott earlier said Jones and his company were the first prosecutions of an online lottery in New Zealand.
"In a little over a year this lottery generated over $11 million in revenue, making it the largest illegal lottery ever identified in New Zealand," she said.
"Lotteries on this scale are required by law to be licensed and must be conducted for community benefit. In this case Mr McIlroy-Jones sought to pass off his on-line lottery as a 'sales promotion scheme' entirely for self-serving interests and personal gain.
"This is the first prosecution of an online illegal lottery in New Zealand. It clearly signals our lack of tolerance for anyone who tries to evade the strict controls in the Gambling Act that are there to ensure gambling is fair, well-run and responsible, and that any potential harm is minimised to keep our communities safe. It also means money goes back to the community.
"Our investigation, which included the search of multiple addresses across Christchurch and North Canterbury in July 2023 found that Mr McIlroy-Jones personally benefited from selling illegal lottery tickets via online platforms with prizes like high value cars, boats, caravans, cash and a freehold house on offer.
"This successful prosecution should serve as a stark warning to anyone involved in running an illegal lottery of any scale that they can expect to find themselves the focus of our investigators."
Basire said her client would be starting from scratch financially as a result of the offending and had a family to provide for.
"I have spent a lot of time with Mr McIlroy-Jones over the last 18 months, I do believe he is someone who has a lot to offer the community," she said.
"I believe he fell into this offending, not because he has any criminal mindset, and I do ask you take that into account."
McIlroy-Jones will be formally sentenced in June.
