Early Wednesday morning, approximately 1,000 law enforcement officials raided Los Angeles businesses throughout the city’s Fashion District, resulting in nine arrests and what has now been determined to be over $100 million in cash seizures, according to Thom Mrozek, a spokesman for federal prosecutors. The raid resulted from in-depth investigations into black market laundering of drug trade profits involving foreign drug cartels.
“We have targeted money laundering activities in the Fashion District based on a wealth of information that numerous businesses there are engaged in Black Market Peso Exchange schemes,” said Assistant United States Attorney Robert E. Dugdale. “Los Angeles has become the epicenter of narco-dollar money laundering with couriers regularly bringing duffel bags and suitcases full of cash to many businesses.”
Breitbart previously reported on events that related to three indictments unsealed the same day as the raids.
In one of the indictments, the Mexico-based Sinaloa Drug Cartel is accused of using Fashion District wholesaler QT Fashion, Inc. to launder funds. That business allegedly subsequently funneled the cash through 17 other Fashion District businesses. The funds in this indictment were specifically related to $140,000 in ransom paid for the release of a kidnapped U.S. citizen who was held hostage and tortured at a ranch in Mexico. While held at the ranch, the man was beaten, shot, electrocuted and waterboarded.
The kidnapped man had been a distributor for the cartel when U.S. authorities previously seized 100 kilograms of cocaine he was responsible for distributing. He was released when the ransom was paid, and he now resides in the U.S.
Three defendants were arrested Wednesday in connection with the QT Fashion indictment. Another three, linked to the Sinaloa, Mexico-based business Maria Ferre S.A. de C.V., remain at large. All three wanted by authorities are from Culiacan, Sinaloa, Mexico.
Two other indictments involved alleged Fashion District stores’ use of a Black Market Peso Exchange (BMPE) scheme.
A BMPE scheme involves a peso broker setting up transactions with legitimate importing and exporting businesses in order to launder proceeds for an individual perpetrating illegal activity, like drug traffickers. Traffickers need to convert funds when bringing funds from the U.S. back to Mexico, for example. High-dollar currency exchange raises suspicion from authorities.
Instead, in these cases, drug traffickers allegedly would drop U.S. cash from drug sales at the Fashion District businesses. That cash would pay for goods to be shipped to the foreign importer who would then sell the goods and pay the peso dealer in pesos. The peso dealer would take a cut, and return the remaining pesos to the drug dealer.
The second indictment charges three members of a Temple City, California family with conspiracy, money laundering and “various immigration offenses.” Two of the three Chen family members were arrested on Wednesday; a third, 28 year-old Aixia Chen, remains a fugitive sought by authorities. Chen family businesses Yili Underwear and Gayima Underwear are listed in the indictment as receiving bulk cash payments from an L.A. drug trafficker and an undercover agent posing as a drug trafficker.
Four defendants were arrested in connection with a third indictment involving Fashion District business Eurotex, Corp. Charges include conspiracy to launder and structure currency transactions to avoid detection. The four men charged include the CEO and CFO. Two of the defendants are from Beverly Hills.
Defendants in the Eurotex indictment allegedly received bulk cash payments knowing or believing the money was the result of drug transactions. The proceeds were then laundered to foreign countries in the trade-based money laundering scheme.
Claude Arnold, special agent in charge for Homeland Security Investigations in L.A. said, “These arrests and seizures should serve as a sobering warning to companies that seek to bolster their bottom line by doing business with drug traffickers–you will pay a high price for your complicity.”
He continued: “Unscrupulous companies that help cartels cover their financial tracks by laundering their illicit funds are contributing to the devastation wrought by the international drug trade.”
Trade-based money laundering has increasingly been used by cartels to launder money, making it easier to transport cash across the U.S.-Mexico border. In 2007, major Sinaloa-cartel tied Mexican money launderer Blanca Margarita Cazares Salazar (Blanca Cazares) was specially designated as a narcotics trafficker and subject to economic sanctions, according to a U.S. Department of Treasury release. 19 companies and 22 individuals in Mexico involved with Salazar were also specially designated.
“Although Mexican cartels are only now beginning to regularly employ trade-based laundering, Colombian traffickers perfected the scheme long ago, authorities say,” reported the L.A. Times in a 2011 article. That report spoke of the increase in trade-based money laundering and the Blanca Cazares case, calling Cazares the pioneer of this laundering method and the “alleged queen of money-laundering for the multibillion-dollar Sinaloa cartel.”
The Times went on to mention a 2010 case in which “U.S. federal officials indicted Los Angeles-based Angel Toy Corp., a firm better known for churning out plush teddy bears and Easter bunnies, on money-laundering charges. The company’s three top executives were arrested.” The indictment detailed men arriving at the company’s workshop with bags filled with cocaine sale proceeds. Charges were reportedly dropped in a plea deal.
A third country may be added to trade-based laundering transactions in order to further obscure the trail, according to the Times article. Examples allegedly included China in the Cazares case and Taiwan in the Angel Toy case.
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