Federal authorities seized at least $90 million Wednesday during raids in connection with an alleged Los Angeles-based money-laundering scheme run by Mexican drug cartels. A U.S. Attorney's office spokesman told KPCC agents seized $70 million in cash and another $20 million from bank accounts.
Approximately 1,000 law enforcement officers were involved in raids targeting 70 locations. Officials say massive amounts of cash were funneled through businesses in the bustling downtown Los Angeles fashion district.
In one raid on a Bel Air home, officers discovered at least $35 million in hundred dollar bills that were stuffed inside banker’s boxes, according to authorities. Nine people were arrested as part of three separate federal cases.
“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,” said Assistant U.S. Attorney Robert Dugdale.
Authorities used undercover agents to identify businesses involved in what’s known as the “Black Market Peso Exchange,” also known as Trade-Based Money Laundering. Under the scheme, officials said, a “peso broker” working for a cartel identifies a Mexican business that imports products from L.A.'s fashion district.
Investigators said the Mexican business would never send money north. Instead, a broker would arrange for drug dealers in Los Angeles to pay the U.S. business for merchandise that would be sent south across the border. Then a Mexican business would sell the merchandise and pay off the peso broker. The broker would take a cut and pay the rest to the drug cartel, according to federal agents tracking the scheme.
“They don’t have to run the risk of running bags of money across the border,” Dugdale said. Federal investigators say this type of money laundering exploded after Mexico restricted the use of American dollars within its borders.
According to a statement from the Los Angeles U.S. Attorney’s office, the Sinaloa Drug Cartel used a Los Angeles fashion district business to accept and launder ransom payments, which were used to secure the release of a U.S. citizen who was kidnapped, held hostage and tortured at a ranch in Mexico.
“The victim was held at a ranch in Culiacan, Sinaloa, where he was beaten, shot, electrocuted and waterboarded,” according to investigators. “The hostage was released after relatives paid $140,000 in ransom, and he is currently in the United States.”
Three people were arrested for their roles in the scheme, based at QT Fashion, Inc., (which did business under the names QT Maternity and Andres Fashion), according to authorities.
“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,” said Claude Arnold, special agent in charge for Homeland Security Investigations in Los Angeles.
In fact, federal authorities warned more than 160 businesses last year that they were failing to file proper IRS paperwork on money exchanges and unknowingly involved in money laundering.
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This story has been updated.