The owners of China Gourmet, 23 Tyler St. in Chinatown, and six alleged accomplices were indicted this week on federal charges that they ran a ring that laundered hundreds of thousands of dollars - some trucked up from New York City at the bottom of shipments of meat and seafood - and collected stolen gift cards, which they'd redeem by buying hundreds of computers and other items at the Apple Store at South Shore Plaza in Braintree.
Seven of the eight were charged with conspiracy to commit money laundering and unlicensed money transmitting, which could mean prison sentences of up to 20 years if they're convicted, the US Attorney's office in Boston reports: Qiu Mei Zeng, 47, of Quincy and her former husband, Shi Rong Zhang, 48, of Windham, NH, co-owners of China Gourmet and Vincent Feng, 32, of Quincy, Da Zeng, 30, of Massachusetts, Wei Qing Zeng, 58, of Quincy, Xian Rong Zeng, 45, of Hanover and Qiu Fang Zeng, 59, of Windham, NH. Chengzou Liu, 36, of Braintree, was indicted on a charge of conspiracy to commit money laundering and possession of marijuana with intent to distribute.
According to an affidavit by a DEA agent who worked on the months-long investigation, the ring did two main types of business: It would exchange large amounts of American dollars into Chinese renminbi, for the kind of people who didn't want to alert either country's governments that they were doing so, including Liu with the alleged pot business and at least one person trying to get rid of dye-stained bills from a bank robbery. And, the affidavit continues, ring members would collect large numbers of stolen gift cards, which rthey would then take down to the South Shore Plaza Apple store and try to exchange for laptops, tablets and phones. In turn, Zhang would then sell the devices through a separate company he owned to purchasers in Dubai and the United Arab Emirates for re-sale in places and other places where Apple stuff was either prohibited or more expensive than in the US.
Much of the ring's business was conducted in a small office next to China Gourmet. In addition to co-owning that restaurant, Zeng also owns Food Wall on Centre Street in Jamaica Plain. That restaurant was not involved in the money laundering, except that Zeng sometimes got a ride from there to China Gourmet from another alleged ring member, according to the affidavit.
The affidavit describes the basic money-laundering scheme, which the feds allege also involved a number of family members in China, who would open numerous bank accounts there with which to split up transactions to avoid that country's own money-laundering restrictions - based on an investigation that included both extensive wiretapping and the use of GPS devices placed on alleged ring members's vehicles:
Based on my knowledge of money laundering and black market currency exchanges, the individuals conducting these transactions often offer a discount from the currency exchange rate between RMB and USD for those looking to pick up USD, and charge a fee for those looking to launder USD. Based on my training, and experience, I believe brokers are able to offer this discount to customers seeking cash because they are being paid a commission by customers looking to launder the cash. Because the cash constitutes illegal drug proceeds, criminals are willing to pay a fee in order to move and clean their proceeds. This fee from those delivering cash offsets the discount offered to those retrieving cash. This illegal scheme benefits all parties. By charging a fee and offering a discount less than that fee, the broker still profits from the transaction. The criminal's drug proceeds never enter the U.S. banking system and effectively avoid U.S. banking reporting requirements and law enforcement detection. Chinese customers in the U.S. can acquire USD at a discount, all while avoiding China's capital flight limits, which prevent Chinese nationals from transferring large quantities of money out of China and thereby limit access to funds for those in the U.S.
As heard on wiretaps, Zhang would tell prospective customers that he didn't like doing large-volume money exchanges, because that might attract the attention of federal regulators, but that when large transactions couldn't be avoided, he could use the restaurant as an excuse for why he might have been caught with a large sum of money. The affidavit describes a meeting between Zhang and an undercover agent posing as a driver for a customer - an undercover informant called CS - at the restaurant office shortly after noon on May 10 - in which Zhang discussed his limits in terms of "units" of $10,000 each:
After UC finished counting the money, ZHANG offered UC a bag in which to store the money. UC then told ZHANG that UC's boss (CS) wanted UC to come pick up a very large transaction. ZHANG responded that "if the stuff is too much then risk runs high...if we do 10 something each time, it's easier for both sides to absorb. If it is 30, 40 units, then the nature will be different." I believe ZHANG explained to UC that moving $300,000-$400,000 at a time was too risky because it might attract law enforcement and/or banking attention. UC suggested that he could do $150,000-$200,000 at a time, once in the morning, once in the afternoon, and once in the evening, and ZHANG agreed. ZHANG explained, "We've been doing this for a long time. I don't know how long you have been doing it. For us, like we have a restaurant, and we have a lot of income, but it's our money. If there's too much we can't explain it, and it will be confiscated...I don't know if you've had an accident in the past. Things happen when you've been in the business for long enough. Something will go wrong. Eventually you will hit a wall. If you are not careful." I believe ZHANG was warning UC against moving too much money too quickly and explained that he (ZHANG) was able to move large quantities of money because they could pretend it was income from the China Gourmet restaurant.
Also, the restaurant was useful because while Tyler Street had Boston Police surveillance cameras, it could be difficult to pick out would-be money launderers from all the other people milling about the street:
ZHANG also suggested that the next time they met to conduct a transaction, UC could come right up to Target Location 1 [China Gourmet] without greeting ZHANG because he would just look like any other customer of the restaurant in case anyone was watching the cameras around Chinatown: "Like from the police or something. Why we like it here is because we are a restaurant, people come and go. You come to Chinatown and buy some food and leave, who knows. Right?" I believe ZHANG admitted that he liked conducting his money transmitting and money laundering business within his restaurant because the restaurant provided legitimate cover for their illegitimate activities.
The ring focused on laundering money from both Boston and New York. Using GPS devices and wiretaps, the affidavit continues, on March 3, investigators tracked one ring member's trip to and from a Chinese meat market on Grand Street in New York's Chinatown:
At approximately 9:00 p.m., investigators executed a motor vehicle stop of WEI QING's vehicle as he drove on I-90, near the Massachusetts State Police Weston Barracks. Based on the intercepted communications and the investigation to date, investigators searched WEI QING's vehicle and located a large quantity of frozen seafood and meats. Inside a box of frozen meat, investigators located a plastic bag hidden underneath the meat. Inside the plastic bag, investigators located over $250,000 in cash.
Notably, some of the bills appeared to be stained with dye. Based on my training and experience, I know that banks often include dye packs with cash that is stolen during bank robberies as a way to permanently mark stolen cash. Based on these observations, I believe some of the bulk cash in WEI QING's vehicle may have been stolen.
But in addition to cash, the ring also trafficked in stolen gift cards, in particular American Express cards, which they would then use to buy Apple computers, tablets and phones that they could sell to middlemen in the Middle East, the affidavit states.
Once in possession of the illegal gift cards, ZHANG, DA, and a network of other "shoppers" purchase Apple products online and/or in store using these illicit funds. In particular, the Target Subjects often purchase Apple gift cards with the stolen and/or fraudulent American Express gift cards. I believe the purpose of this activity is to "clean" the illicit proceeds and hide the true nature and source of those funds. I also believe the purpose of this activity to is quickly remove and secure the value from the illicit gift cards before American Express can freeze the stolen account and/or before the rightful owner can lawfully use the funds on the card. Once in possession of "clean" Apple gift cards, ZHANG, DA, and the shoppers use multiple Apple gift cards at a time to purchase Apple products, including iPads, laptops, and iPhones. ZHANG, ZENG, FENG, and others then work together to ship these goods overseas, including to Dubai, United Arab Emirates ("UAE"). Once in Dubai, the devices are believed to be sold to countries in which Apple devices are otherwise not lawfully available or are prohibitively expensive. The funds from the international sale of these devices are then funneled back to the United States, including through wire transfers to ZHANG, FENG, and others. I believe the purpose of this trade-based money laundering scheme is to hide the true nature and source of the illicit funds and secure "clean" funds on the back side.
Althought the ring would try to use some of the cards online, participants also made frequent trips to the South Shore Plaza, where some of them became familiar to Apple Store employees, according to the DEA agent:
On February 23, 2022, DA and ZHANG had a lengthy conversation about purchasing Apple devices with gift cards. DA said that he had $80,000-$90,000 worth of gift cards. ZHANG asked DA to bring those cards over to him so that he could divide them up and have "his people" (the shoppers) go wait in line for Apple devices. DA added that he had purchased six devices himself that day.
The following day, February 24, 2022, investigators utilized court-authorized precise location information for DA Phone to locate him at an Apple store in the South Shore mall in Braintree, Massachusetts, where they initiated physical surveillance. There, investigators observed DA pick up six more Apple iPhones. Investigators obtained the records from the Apple store which confirmed that DA had purchased the six devices ahead of time and had paid electronically.
Similar observations were made four days later on February 28, 2022, when investigators conducted surveillance at the same Apple store in the South Shore mall in Braintree. At approximately 4:41 p.m., investigators observed DA inside the Apple store with two other Asian individuals, a male and a female. Investigators spoke to employees at the Apple store who noted that they had seen the female on prior occasions and that she frequently came into the Apple store to exchange Apple phones for gift cards or to purchase Apple gift cards. By approximately 5:06 p.m., the male and female had departed, but DA remained at the mall. At around 5:23 p.m., DA reentered the Apple Store and attempted to conduct a purchase, but his payment was declined. Shortly after 6:00 p.m., DA returned to the Apple store and was apparently successful in purchasing $8,000 in Apple gift cards (according to an Apple employee). At approximately 6:12 p.m., investigators observed DA approach a different employee inside the Apple store to make an additional purchase. And at 6:20 p.m., investigators observed DA approach yet another Apple employee to make a purchase. Investigators learned from Apple employees that many of DA's payment methods were declined when he was trying to make these purchases. Based on DA's repeated attempts to purchase Apple products from different employees with payment methods that were being declined, investigators believe DA was using stolen or otherwise illegitimate payment methods to conduct these transactions, and that they were being declined because the payment sources had been flagged or frozen.
On March 2, investigators watched a repeat performance at the Apple Store, but this time stopped the hapless Da to have a little chat:
Investigators approached DA, who was found in possession of numerous Apple gift cards worth an estimated $60,000, several newly-purchased cell phones, numerous receipts for Apple Store transactions, and six active, powered-on cell phones. DA agreed to speak with investigators but provided mostly false information about his activities. For example, DA claimed that he purchased cell phones and Apple gift cards with his own money that he saved up from working at a Chinese food restaurant but admitted that he had not worked at the restaurant in several years. DA also had a receipt for an order of Apple products in ZHANG's name. DA claimed, however, that he made up Shi Rong ZHANG's name, and that he was not working with anyone else (including ZHANG) to purchase Apple products. Based on the investigation to date— including the numerous intercepted conversations between ZHANG and DA - investigators believe DA's statements about not knowing ZHANG and purchasing the Apple products with his own earnings were untruthful.
Not everything Da said was a lie, the affidavit continues:
Certain other of DA's statements appeared, based on the investigation to date, to be truthful (at least in part). For example, DA claimed to purchase $30,000-$50,000 worth of Apple gift cards per day, as well as six to seven Apple phones. This volume is consistent with the observations made by investigators discussed above. DA also claimed to sell the phones to people in the UAE for a profit of $10 per device. Over the course of the investigation, as described below, investigators have observed ZHANG shipping numerous packages to Dubai, and have intercepted conversations with ZHANG and others in which he discussed shipping Apple products to Dubai. Finally, DA originally claimed that he sold the Apple gift cards, but then later changed his response to admit that he used the gift cards to purchase more Apple devices to sell to the UAE. Based on the numerous receipts obtained from DA, which showed purchases of Apple phones paid for by Apple gift cards, investigators believe this latter answer was likely more accurate.
Investigators questioned DA about why he was using six different active phones. DA showed investigators that five of the devices were not connected to cellular services, but rather only being used as "digital wallets" and were only connected to Wi-Fi. DA showed investigators the Apple wallets on these devices, which each contained around 20 prepaid American Express gift cards valued at $500 each. DA explained that he used these American Express gift cards to buy Apple gift cards. When asked why DA was using those numerous American Express gift cards as opposed to a credit or debit card to make these purchases, DA refused to answer and changed the subject. DA was released without charges, but investigators seized the gift cards.
Complete affidavit (1.9M PDF).