I'm basing this next bit on how Toothache acted in the last couple of mafia games...
In any of the games I've seen, Toothache hasn't displayed any of the flair or deviousness that some of you believe he is trying to use or pull here... In the first HP Mafia, he was on my team, the Death Eaters, and on our forums, was really just a sheep more than a leader. He never came up with any plan like this, or any plan at all really.
This leads me to believe that what he is saying now is nothing other than the truth, and more than likely the entire truth.
I want to lynch Obi, but I almost believe that he is a turncoat style character, that could end up on the students side. My theory: if a certain amount of time passes and Cornelius Fudge is not killed, Percy will move to the students side. Why? After this time he becomes disillusioned with the Ministry, and seeing as how he doesn't inherit Fudges power and corruptness, turns traitor.