If there was a legitimate money-winning or money-laundering strategy behind the millions of dollars bet on Wednesday afternoon in exotic pools at racetracks across the U.S., no one in racing knows yet what it could possibly be. First off, if you are going to commit fraud, it helps if you don’t do it in broad daylight. Yet the stratospheric wager amounts, bet often into single super-exotic pools at tracks that aren’t exactly prime-time betting draws, instantly set off red flags at monitoring systems used by the racing industry – while also being easily visible to the general public watching simulcast feeds or accessing pool data. Secondly, the strategy used by the bettor guaranteed that the wagers would generate winning bets by, according to multiple officials with knowledge of the incidents, using the “all” button in each position in the superfecta and super high five pools, But that strategy also involved betting enormous multiples of the combinations, in pools in which bets at small denominations can lead to large, profitable payouts. By betting at large multiples, the bettor was driving down the payoff in each pool, a counterproductive strategy for anyone who isn’t ignorant about how pari-mutuel markets work. The player (or players) also used an account at a leading account-wagering company, TVG, which is owned by the gambling behemoth FanDuel. Not only would the size and structure of such bets draw attention from the company’s internal auditors and red-flag system, but the identity of the person who made the bets would be obvious. And to stop the activity, all FanDuel needed to do was shut down one or more accounts being used by the perpetrator. FanDuel did in fact shut the account or accounts down, according to a statement the company released late on Wednesday afternoon, approximately three hours after the irregularities began. While that led to an immediate cessation in the suspicious activity, it still has not led to any explanation of the ultimate goal of the bettor or bettors involved. And by doing the math, it gets really puzzling. According to the officials, the player used the “all-all-all-all-all” strategy for a super high five at Churchill Downs in the track’s fourth race, which had only seven horses in the field. According to the officials, the player bet that combination at a $20 base, for a total of $50,400 in bets on that single punch (the number of combinations using that strategy to cover all the possible results in a seven-horse race is 2,520). But the player then punched that ticket 10 more times, for a total of $554,400 in bets. After the size of the pool attracted the attention of computerized robotic wagering teams, the total size of the Churchill super high five pool reached $751,000. The bet, which had a formful result, paid off at $388.34 on the $1. The bettor would have had 220 winning tickets at that denomination, or $85,434 in winnings, for a total loss of $468,966. “None of this makes any sense,” said one official who has reviewed the wagering data. Now, it is possible for the “all-all-all-etc.” strategy to work, mathematically, provided the player bets at low denominations and the payoffs exceed the investment. But, because of takeouts and the relative efficiencies of pari-mutuel markets, payoffs can only exceed the investment of using the “all” strategy over the short-term. (Otherwise we’d all be doing it.) Several officials have said that the player bet into other pools at smaller denominations using the same “all”-button strategy earlier in the day, before the big blow-ups. So is it possible that the strategy initially worked over the short-term, leading the player to erroneously conclude that having more winning tickets would lead to greater gains? Or could the player have had losses using that strategy, and then started chasing the losses with tickets at larger denominations, by, once again, coming to a further erroneous conclusion? FanDuel officials would not speak on the record about the incidents, but its statement Wednesday evening contains a clue as to what might have happened. While the statement referenced “potential fraud,” the company also said that it had identified “technical issues.” That could hint that the player or players manipulated their account balance, or that an internal glitch led to an erroneously inflated account balance. If that were the case, the player was using “free money” that existed only as a string of digits, unbacked by hard currency, a mythical windfall created by either a technical glitch or through a deliberate hack. It’s possible to imagine that the player concluded that the best way to exploit that free money was to bet sure things, in pools that generally have large payoffs. But once again, how could the player have possibly come to the conclusion that the activity would go unnoticed once the strategy morphed into using big denominations? “And why wouldn’t you just hit the withdraw button?” one official asked. “Why bet at all?” (A withdrawal of that size would have also set off alarms, not just internally at FanDuel, but at the financial institutions that processed and received the funds.) FanDuel has promised that it “will make public additional details” after it concludes an investigation into the incidents. It’s possible that there was some highly nuanced or complicated strategy underlying all the apparent madness, in league with as-yet unidentified co-conspirators. For the time being, knowing what is known, the rest of the pari-mutuel world can only ponder one question.  What in the world was that guy thinking? :: Want to learn more about handicapping and wagering? Check out DRF's Handicapping 101 and Wagering 101 pages.