The Sinaloa drug cartel worked with an underground Chinese money laundering group in Southern California to wash off more than $50 million — transferring money made from drugs like fentanyl to wealthy Chinese nationals in need of American money.
The head of the U.S. Drug Enforcement Agency joined federal prosecutors and police from five cities in the region Tuesday morning for a news conference announcing charges against 24 people. As part of the massive bust, investigators seized approximately $5 million from narcotics sales, 302 pounds of cocaine, 3,000 ecstasy pills, 92 pounds of meth and 44 pounds of psilocybin, or magic mushrooms, in addition to several ounces of ketamine, three semi-automatic rifles and eight semi-automatic pistols.
Five years of investigation led to the indictment of 10 charges against members of El Chapo’s drug cartel and an underground Chinese banking group with which it became “closely associated,” U.S. Attorney for the Central District of California Martin Estrada told reporters.
KCAL
“These two groups have discovered that they have common interests,” Estrada said.
Anne Milgram, administrator of the DEA, described the cartel as a “ruthless, violent global criminal enterprise responsible for killing Americans and destroying communities from coast to coast.”
“They do this for one reason: money,” Milgram said, adding that the Sinaloa Cartel makes billions every year from the illegal drug trade. “If the cartel’s leaders want to spend the money, the money needs to be cleaned up. For years, the Sinaloa Cartel relied on smuggling truckloads of cash into Mexico or using middlemen to launder that money through banks and corporations. “
“This investigation shows that the Sinaloa Cartel has entered into a new criminal partnership with Chinese nationals living in the United States who are laundering money for the cartels,” she said.
Milgram said the cartel has increased its profits by working with the other criminal organization, which helps wealthy Chinese nationals, who are largely prohibited from transferring more than $50,000 a year.
The DEA has traced the cartels’ use of underground Chinese banking groups to launder money to at least 2016, according to testimony before Congress last year by Channing Mavrellis, director of illegal trading at Global Financial Integrity. This is because China has strict economic policies that do not allow the free movement of cash in and out of the country.
“The Chinese citizens who want to exchange or transfer more than $50,000 often turn to informal means,” Mavrellis testified.
Estrada explained how the criminal objectives of both organizations led to the partnership.
KCAL
“The cartels are desperate to get the money made from selling drugs in the United States back to Mexico – without having that money seized by U.S. or Mexican authorities,” Estrada said. “China’s money laundering groups, on the other hand, are busy helping wealthy Chinese nationals obtain cash in this country, thereby circumventing China’s export controls on the movement of cash.”
The main defendant in the indictment is Edgar Joel Martinez-Reyes, a 45-year-old East Los Angeles man accused of working with other cartel associates to conceal the source of the money through money laundering through trading, purchasing cryptocurrency and “structuring” assets in ways that evade federal financial reporting requirements, prosecutors said.
He is said to have met with members of the Sinaloa cartel in Mexico in January 2021 to broker a deal with associates of the underground Chinese banking group. He and his co-conspirators are alleged to have delivered money earned from the sale of drugs such as fentanyl and meth, often hundreds of thousands of dollars, to “money transmitters” of the criminal Chinese enterprise.
These lenders would then deliver the U.S. money directly to money exchange customers — usually wealthy Chinese trying to avoid expensive cash transfer fees — or “wash” the money by using it to buy luxury goods and cars that were later shipped to China. They would also allegedly deposit the money back into the traditional banking system by making a large number of small deposits into bank accounts specifically for this purpose, preventing these banks from reporting large cash deposits to the government.
Milgram said the money laundering operation also allegedly purchased chemicals used to manufacture drugs such as fentanyl. In recent months, the DEA has been investigating and making arrests related to the China-based chemical supply chain behind fentanyl production. She said one of the defendants in the case had been arrested in China.
The DEA head said the partnership with an underground Chinese banking group also led to increased profits for the cartel.
“These Chinese criminal money laundering networks can make money faster, cheaper and at a fraction of what they normally charge,” Milgram said. “Chinese money laundering networks charge only a 1 to 2 percent commission for laundering drug money – compared to the 5 to 10 percent charged by traditional money launderers.”
Reyes allegedly led a ring of money launderers in the Los Angeles area, and these couriers collected hundreds of thousands of dollars at a time. Milgram said these operatives would pick up “teenagers, 20-somethings, 50-somethings and hundreds wrapped in rubber bands from drug traffickers supplied by the Sinaloa Cartel.”
“These couriers took that money, counted it, packaged it and deposited it into bank accounts in their own names and in the names of others, depositing small amounts over and over again to evade the bank’s reporting requirements,” Milgram said.
In one case, she said, one of the couriers made 24 small deposits into a Citibank ATM, totaling $16,000. Another courier allegedly deposited nearly $20,000 into another Citibank bank account through 15 consecutive deposits – just a few days after the other 24 deposits.
