There was no present in the white gift bag with the cheerful text ‘Happy Birthday’ on the side. It had $226,000 in cash that the Sinaloa drug cartel was supposed to launder, authorities allege.
The US Department of Justice announced this on Tuesday announced a multi-count indictment who accused more than a dozen members of Mexico’s Sinaloa drug cartel and Los Angeles-based Chinese currency brokers of conspiring for years to launder drug money. The main defendant, Edgar Joel Martinez-Reyes, 45, is a resident of East Los Angeles. The investigation has so far yielded $5 million in cash, more than 300 pounds of cocaine, 92 pounds of methamphetamine, 3,000 ecstasy pills and 44 pounds of magic mushrooms. According to the indictment, the list of Peiji defendants includes “Dr. P”Tong, Sai “Tommy” Zhang, Chengwu “Ocean” He, Raul “Batman” Contreras, Jiaxuan “Edward” He, Diego Acosta Ovalle and others.
The first 20 suspects will be arraigned in the coming weeks and if convicted on all charges, all face a minimum of 10 years in prison or a maximum sentence of life in prison.
“Relentless greed and the pursuit of money are driving the Mexican drug cartels responsible for the worst drug crisis in U.S. history,” said DEA Administrator Anne Milgram. in a statement. “This DEA investigation uncovered a partnership between Sinaloa Cartel associates and a Chinese criminal syndicate operating in Los Angeles and China to launder drug money.”
The DOJ said the cartel, based in Mexico’s Sinaloa state, has been behind the rising infusion of fentanyl into the U.S. for the past eight years, bringing in hordes of money. To get the money to Mexico, cartel members turned to Chinese currency exchanges in the U.S., authorities said. To set it up, Martinez-Reyes and “Dr. P”Tong is said to have gone to Mexico about four years ago to sign contracts to launder the cartel’s drug profits in exchange for a commission.
After the deal was made, drug dealers loaded with cash delivered it to currency brokers for money laundering purposes. To disguise the money, the defendants used gift bags, reusable shopping bags, backpacks, a box of Fruity Pebbles and other items to hide the money, authorities said.
Prosecutors said the couriers bought crypto, or deposited the money into bank accounts in small, structured doses. The indictment states that the cryptocurrency can be easily transferred to Sinaloa cartel accounts. Other methods of laundering the profits included buying precious metals and gemstones and bringing them to Mexico for sale.
The indictment outlines a complex scheme involving Chinese currency exchanges. The currency exchanges that work with the cartels also help wealthy Chinese nationals who invest in China and want to transfer their money to the U.S. but are excluded by the Chinese government, the DOJ said. Rules in China prohibit people from moving more than $50,000 a year out of the country.
To get around the restrictions, Chinese residents are using brokers who sell U.S. dollars, authorities said. The brokers provide China-based residents with bank account information in China with instructions to deposit Chinese currency into an account. Once the account holder confirms the deposit, an equivalent amount in US dollars is given to the US broker. The brokers take cash from the cartels and charge a percentage commission of about 0.5% to 2% of the total amount to disguise the drug money. (Traditional money launderers charge much higher rates than Chinese money launderers, authorities said, ranging from 5% to 10% or more.)
“Drug traffickers are increasingly working with Chinese underground currency exchanges to capitalize on the high demand for U.S. dollars from Chinese nationals,” the DOJ said.
The brokers delivered the U.S. dollars directly to customers or purchased property, luxury goods and cars that they shipped to China, the indictment said. The money transferred in China was used to buy items for companies in Mexico, such as consumer goods or chemicals used to make more narcotics, authorities said.
“This case is a prime example of Chinese money launderers working hand-in-hand with drug traffickers in an effort to legitimize profits from drug operations,” said Guy Ficco, Chief of the IRS Criminal Investigation.
