Here's a curious story, that I found posted over
on Reddit the other day and it just goes to show how there are companies out there making big money by gambling. I've highlighted the most interesting points, but the whole story seems fascinating to me. I'd never thought it would be possible to make such large and reliable amounts, looks like they make most of their profits from their huge scale and cashback (rebates) they get from bookmakers:
Zeljko Ranogajec or 'Z' or 'Dr. Z' is the biggest punter that the world has ever seen and likely will ever see. Zeljko got his start working at the local casino while studying Commerce and Law at the University of Tasmania. He began to count cards at the local casino, while not working, with his best friend and soon to be business partner, David Walsh. After winning a substantial amount of money, they were both banned from the casino. Zeljko started counting cards at casinos across the nation, but he was inevitably banned from these casinos too. He was then forced to make forays to Korea to play blackjack to keep himself afloat during 'hard times'. Eventually, he moved overseas to card count in the United States. While there he made $5 million from the 'Chocolate Wheel' by clocking the rotations of the wheel with a stopwatch and betting to advantage. He also worked in a card counting team, which included David Walsh, before returning to Australia.
Zeljko turned his attention to the Keno upon arriving in Australia. In conjunction with David Walsh and Phillip Turner, he bet into the Keno from a room above a bar in Tasmania for a decade. The success of the syndicate was largely attributable to the deal they cut with the bar owner to share the commission received from the Keno. This deal effectively lowered the house's take from the Keno from 25% to 17%. Betting tickets left behind at the bar showed that the syndicate was betting $340,000 on Keno at one time. According to one source, the syndicate 'never lost a jackpot'.
Zeljko's domination over horse racing betting markets across the world began with Humbleton. Humbleton is rumoured to turnover $1-3 billion annually. It is a very secretive organisation based in Sydney that employs mathematicians, data analysts, computer scientists, and video analysts to bet on races in Japan, Hong Kong, England, Australia and the United States.
Humbleton uses a perturbation model that starts with the assumption that the public is right and then works out what small errors they might make. The willingness to 'embrace the wisdom of crowds' is the key factor that gives the syndicate an edge according to David Walsh. At one point, Zeljko operated an exchange called 'WBX' that produced computer generated bets for the public to bet against. This was designed as a form of market intelligence to be input into the syndicate's models and algorithms. Most of the syndicates betting is executed very late using computer models driven by complex algorithms that place thousands of bets in the final minutes before a race jumps. The syndicate mostly bets on totes (using rebates) or exchanges. In Australia, the syndicate wins in its own right without the rebates. It contributes $10 billion annually to the totes, which accounts for 6-8% of TAB's turnover, but receives rebates of anywhere from 8-10%.
Zeljko famously caused Tote Tasmania to become unprofitable, after negotiating a lopsided deal to secure an aggressive rebate of 10.5% in 2007. In the United States, the syndicate relied on rebates of 13% to earn $44 million over a three and a half year period from an outlay of just $200,000.
Zeljko is rumoured to account for 25% of all Betfair liquidity.Zeljko, along with Humbleton, has encountered a number of tax issues over the years. After reaching a settlement with the ATO in 2012 for around $700 million, he left Australia for London. In London, he founded Colossus Bets which specialise in tote pool betting. The settlement with the ATO prompted Zeljko to move the headquarters of all his operations to the Isle of Man. In 2018, he was appointed as a consultant to Newfield Limited, an international racing and sports event company. As of 2020, Zeljko is said to be worth $600 million.
