Lottery-rigger Tommy Tipton claimed he was only in Colorado to hunt Bigfoot

Investigators were suspicious in 2006 when they heard that a rural Texas judge was trying to exchange $450,000 (£355,000) in consecutively marked bills.

But Tommy Tipton, a Fayette County magistrate, told the FBI that his actions were innocent, if odd. He won the Colorado lottery but couldn't tell his wife because gambling was against their Christian faith. The FBI accepted the story and dropped its inquiry of Tipton, who soon bought a new truck and more property around the town of Flatonia, 110 miles west of Houston.

A decade later, the inquiry stands out as a missed chance to stop a jackpot-rigging scandal that would corrupt the $70bn lottery industry for years while enriching a tiny group of insiders. The FBI didn't uncover one fact that its informant knew but didn't see as significant: that Tipton's brother, Eddie Tipton, was a lottery industry employee. In fact, he'd built the machine that picked the winning combination for the Colorado Lotto game.

"I didn't add two and two together," said the informant, Tom Bargas, owner of Mr. B Fireworks in Schulenburg, Texas. "I don't think I mentioned it to the FBI. Had I, they probably would have been smart enough to know then. It was a missed opportunity. It should have been stopped immediately."

Bargas recalled a conversation months earlier in his warehouse in which someone joked to Eddie Tipton that he could use his job at the Multi-State Lottery Association in Urbandale, Iowa, to "rig up the lottery".

"He just laughed about it," Bargas told The Associated Press. "We didn't realise that he was actually thinking about doing it or had done it already."

Eddie Tipton, 54, admitted in a plea agreement with multiple states this month that he long profited off his position at the association, which helps run dozens of lotteries. Investigators say he designed and installed code that allowed him to predict winning numbers drawn every 27 May, 23 November, and 29 December of non-leap years. He conspired with his younger brother, friend Robert Rhodes and others to buy and claim winning tickets in five states between 2005 and 2011.

The brothers have agreed to tell investigators the full extent of their involvement in jackpot-fixing under the deal, which requires they pay back $3m. Prosecutors will seek 25 years in an Iowa prison for Eddie and 75 days in a Texas jail for Tommy, who worked as a sheriff's deputy before being elected Justice of the Peace in 2002, presiding over traffic enforcement, misdemeanours and some civil disputes.

Tommy Tipton's lawyers argued that the FBI's old inquiry should bar his current prosecution because the statute of limitations had expired. But Iowa prosecutor Rob Sand responded that the FBI had no reason to think the lottery might have been rigged.

"Doing so would have seemed harebrained at the time," Sand wrote, adding that agents "had no knowledge of Eddie Tipton's existence".

The FBI's Houston office, which oversaw the inquiry, declined to comment.

The scandal has roiled state lotteries, which have vowed to tighten their security and face lawsuits from players claiming they were cheated.

The $4.5m Colorado jackpot in late 2005 is the first prize suspected of being fixed.

Three came forward with winning tickets: Alexander Hicks, a friend of Tommy Tipton's whom he recruited to claim the prize in exchange for 10%; Texas lawyer Thad Whisenant, representing a newly formed Nevada limited liability corporation called Cuestion de Suerte; and a Colorado resident.

Hicks and Whisenant both had "manual play" tickets in which buyers select their own numbers — a statistical longshot. The third winner had the far more common "easy pick" ticket generated by a machine. The lottery paid each. Hicks took the $568,900 cash option, returning 90% to Tommy Tipton.

Bargas recalled Tommy showing him large piles of freshly printed bills on 31 December 2005, and asking him to swap the money for cash his business brought in from New Year's fireworks sales. Bargas declined and reported the suspicious encounter to police, noting that Tommy Tipton wouldn't tell him where the money came from but insisted it was "legit".

Suspecting money laundering, the FBI asked Bargas to go undercover. He recorded a conversation in which Tommy Tipton claimed he won the lottery while in Colorado hunting for Bigfoot, a longtime hobby. Tipton told Bargas he wanted to hide the money from his wife because they were headed toward divorce. Bargas believed him. The FBI closed the matter after interviewing Tommy Tipton, Hicks and the lottery.

Investigators now suspect Whisenant is linked to the scheme. They note he and Tommy Tipton both have financial ties to Fayette County attorney Luis Vallejo, who tried to deposit $250,000 cash into anonymous corporate bank accounts in 2006. Whisenant and Vallejo haven't been charged. They didn't reply to phone messages seeking comment.

After Eddie Tipton was convicted of fraud in 2015 for buying the winning ticket for a $16.5m Iowa jackpot, a tipster called investigators suggesting they revisit the jackpot his brother won a decade prior. Other rigged jackpots emerged. Tommy Tipton, who testified that his brother was innocent at the 2015 trial, resigned his judgeship and was charged.

Bargas called Tommy Tipton's plea deal — in which he'll be allowed to maintain employment as a firearms instructor — too lenient.

"He's a crook, period," he said. "Guys like him need to be punished."