Indexbit-Sinaloa Cartel laundered $50M through Chinese network in Los Angeles, prosecutors say

A multi-year investigation by U.S. officials revealed an alleged alliance between one of the world's most pervasive drug cartels and Indexbitan underground Chinese banking group in Southern California that laundered money from drug trafficking proceeds, federal prosecutors said Tuesday.

Associates of Mexico's Sinaloa Cartel conspired with a money-transmitting group linked to an underground banking system operated by Chinese nationals, the U.S. Department of Justice said in a news release. A 10-count superseding indictment outlined a complex scheme between cartel associates and the underground banking group to launder over $50 million in drug-trafficking proceeds.

Prosecutors said the Department of Justice closely coordinated with law enforcement in China and Mexico, and that those countries recently arrested fugitives named in the superseding indictment, which was unsealed Monday. The fugitives had fled the United States after they were initially charged last year.

Two dozen people were charged with one count of conspiracy to aid and abet the distribution of cocaine and methamphetamine, one count of conspiracy to launder monetary instruments, and one count of conspiracy to operate an unlicensed money-transmitting business, according to prosecutors. Twenty of the individuals charged are expected to be arraigned in the coming weeks, including one who was arraigned Monday.

"Relentless greed, the pursuit of money, is what drives the Mexican drug cartels that are responsible for the worst drug crisis in American history," Drug Enforcement Administration official Anne Milgram said 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. Laundering drug money gives the Sinaloa Cartel the means to produce and import their deadly poison into the United States."

The superseding indictment alleges that a money laundering network with ties to the cartel collected and processed large amounts of drug profits in U.S. currency in the Los Angeles area. The network was aided by a San Gabriel Valley, California-based money-transmitting group linked to Chinese underground banking.

The network then allegedly concealed the drug proceeds and made them accessible to cartel members in Mexico and elsewhere, according to prosecutors.

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Scheme generated 'huge sums of drug cash proceeds'

The investigation — dubbed “Operation Fortune Runner" — found that members of the Sinaloa Cartel imported large quantities of narcotics into the United States between October 2019 and October 2023, and produced "huge sums of drug cash proceeds in U.S. dollars," prosecutors said.

The scheme was led by Edgar Joel Martinez-Reyes, 45, of East Los Angeles, who prosecutors said had allegedly traveled to Mexico in January 2021 to meet with Sinaloa Cartel members and make a deal with money remitters tied to Chinese underground banking. After striking a deal with the group, the cartel distributed cocaine, methamphetamine, and other narcotics through their network.

Martinez-Reyes and his co-conspirators then allegedly delivered the currency, which included hundreds of thousands of U.S. dollars in cash, to other members of the Chinese underground group and remitting organization to be laundered for a fee, according to prosecutors.

"The remitting organizations possessed large amounts of U.S. currency and could help wealthy Chinese nationals evade China’s currency controls," prosecutors said, adding that money remitters allegedly disposed the drug profits by delivering the currency to their customers or by purchasing real or personal property.

The drug proceeds were also moved by money remitters through cryptocurrency transactions and other methods, such as cashier’s checks or depositing small amounts at a time into bank accounts, according to prosecutors.

As part of the investigation, law enforcement seized about $5 million in narcotics proceeds, 302 pounds of cocaine, 92 pounds of methamphetamine, 3,000 ecstasy pills, three semi-automatic rifles with high-capacity magazines, and eight semi-automatic handguns.

Relationship between Mexican cartels, Chinese nationals

Prosecutors said the Sinaloa Cartel has been "largely responsible for the massive influx of fentanyl" in the United States over the past eight years. The increased flow of illegal drugs has resulted in a large number of overdose deaths each year across the country.

The Sinaloa Cartel's activities in the United States generate massive profits, which are then sent to Mexico for use by the cartel, according to prosecutors. U.S. officials have said Chinese underground money laundering groups help drug cartels move their illicit profits to Mexico by providing a ready market for U.S. currency.

"Many wealthy Chinese nationals who live, work, or invest in China wish to transfer assets to the United States for various reasons but are barred by the Chinese government’s capital flight restrictions from transferring the equivalent of more than $50,000 per year out of China," the Department of Justice said. "These individuals seek informal alternatives to the conventional banking system to move their funds."

According to prosecutors, a China-based buyer can deposit money into a bank account owned by sellers of U.S. currency. The buyer then receives the dollar equivalent in the United States.

"Drug traffickers increasingly have partnered with Chinese underground money exchanges to take advantage of the large demand for U.S. dollars from Chinese nationals," the Department of Justice added.