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Dozens of search and arrest warrants were issued today by about 1,000 law enforcement agents in downtown's Fashion District, all linked to illegal cartel activity. According to a release from the the U.S. Attorney's Office, nine people were arrested in three separate cases, and an estimated $65 million in cash was seized in a Wednesday morning raid of over 70 businesses.
The businesses are accused of using what's called a Black Market Peso Exchange scheme to traffic drug and ransom money.
In 2010, Mexico limited the use of American dollars, which meant that cartels had to find a way to discretely convert their American drug sales into pesos, L.A. Times reports. The Black Market Peso Exchange scheme involved a "peso broker" who worked for a cartel or trafficking group and who would find a Mexican business that imported legal products from a U.S. business. The broker would arrange for traffickers in the U.S. to pay the American business for those products, which the business would ship to Mexico. The Mexican business would sell the products and pay the broker. The broker would then pay the cartel. This cycle allowed cartels to collect their money from drug sales in the U.S. without having to bring the money over the border and without having to exchange the money or wire it.
This cycle was also used to launder ransom money. In one particularly disturbing case, it is alleged that the Sinaloa Drug Cartel was using a business in the Fashion District to launder ransom payments from the relatives of an American hostage that had been kidnapped and tortured by that particular cartel in Mexico.
Three were arrested in relation to that case involving QT Fashion, Inc., which operated as QT Maternity and Andres Fashion. QT allegedly funneled ransom money through 17 other businesses in the Fashion District under the care of Maria Ferre, a business based in Sinaola, Mexico. The man being held for ransom was kidnapped after the over 100 kilograms of cocaine he was supposed to be distributing was seized by the U.S. Authorities say the man was taken to a ranch in Culiacan, Sinaola where he was tortured in numerous ways, including electrocution, beatings and water boardings. He was only released after relatives ponied up $140,000, which was filtered through the businesses.
Robert E. Dugdale, the Assistant U.S. Attorney overseeing the Criminal Division in the Central District of California called L.A. "the epicenter of narcodollar money laundering with couriers regularly bringing duffel bags and suitcases full of cash to many businesses."
An indictment against three people associated with businesses Yili Underwear and Gayima says that the defendants used the businesses to launder money and that they accepted money from an undercover officer acting as a drug dealer.
A third case accused the business Pacific Eurotex, Corp. of participating in the exchange scheme, resulting in four arrests. The indictment claims that blood appeared to be spattered on some of the bulk currency that the business accepted.
Bill L. Lewis, the Assistant Director in Charge of the FBI's Los Angeles Division, released this statement:
Today's arrests and searches should send a message to international drug cartels that the FBI and our partners won't tolerate the exploitation of American businesses for the purposes of illicit financial transactions that fund hostage-taking and the distribution of narcotics. In addition, today's actions should send a warning to American businesses who turn a blind eye to the crime they facilitate, while avoiding reporting requirements, transaction fees and law enforcement scrutiny." All of the defendants were scheduled to be arraigned today in the U.S. District Court.
