Tue. Feb 27th, 2024

New York lawmakers fret that fast-growing chains of marijuana shops across the city could be a source of cash for Middle East terror groups — and they’re pressing for legislation to help root out rogue financiers, The Post has learned.

Owners of the illegal smoke shops — which according to some city officials now number in the thousands, versus just 11 state-licensed shops across the Big Apple — have stayed under the radar with the help of local laws that govern so-called LLCs, or limited-liability companies.

LLCs are legitimately used by businesses to reap tax benefits and secure liability protections. But they are also subject to abuse by tax cheats, money launderers and other criminals — and backers of terrorism could be among them, state Sen. Brad Hoylman-Sigal told The Post.

“We know LLCs are used to hide and funnel money to unsavory causes and could be used to fund terrorist activities,” said Hoylman-Sigal, who is the lead sponsor of the LLC Transparency Act. “It wouldn’t surprise me if there were individuals or groups of individuals who are financing these shops in a comprehensive manner, but we won’t know until we get to the heart of their ownership.”

New York State Senator Brad Hoylman-Sigal says limited liability companies can be used to fund terrorist activities.AP

Passed by the New York legislature in June, the bill would require LLCs to report their owners’ true identities, including names, addresses and birth year, to a public database.

The bill needs Gov. Kathy Hochul’s signature by year’s end to become law.

Shady shop owners

A spokesperson for Hochul said she is reviewing the bill, but it faces stiff opposition from her deep-pocketed supporters, including business and real estate lobbyists.

Insiders say that’s partly because secretive shell companies have been a massive force propping up the New York real estate market.

A study last month found that 37% of Manhattan properties are owned by LLCs.

There are thousands of illegal smoke shops in the city, with many of the owners hidden behind LLCs.Getty Images/iStockphoto

“Russian oligarchs, narco traffickers, terrorists and money laundering dirtbags the world over use New York’s LLC secrecy laws to hide their money,” said John Kaehny, executive director of watchdog group Reinvent Albany, which published the study.

Meanwhile, the explosion of illegal smoke shops across the city has become a political hot potato, with New York mayor Eric Adams claiming there are now 1,500 of them — and the city council saying in an August press release the number is closer to 8,000.

State Sen. Liz Krueger — who sponsored the bill that regulates and taxes marijuana after it was legalized for recreational use in 2021 — said the growth of illegal pot shops citywide has far outstripped anything she expected. Accordingly, Krueger said she’s backing greater disclosure laws around their ownership.

State Sen. Liz Krueger said she is “absolutely concerned that LLCs might be used to fund terrorist groups.”HANS PENNINK

“I think there are people with big money that are fronting these illegal shops,” Kreuger told The Post. “I am absolutely concerned that LLCs might be used to fund terrorist groups.”

An illegal New York City pot shop can rake in tens of thousands of dollars a day – despite the city’s spotty efforts to fine business owners and landlords since the botched rollout.

While intel around ownership remains murky and speculative, weed that ends up at some of the illegal smoke shops has been linked to Chinese criminal networks which are among the biggest cannabis growers in the US, according to Chris Urben, a retired DEA agent who is the managing director for the global investigative firm Nardello & Co.

People in Yemen are showing support for Palestinian factions like at this Oct. 13 rally.REUTERS

The Chinese rogue financiers, in turn, have also historically done business with Lebanese money-laundering networks, according to Urben. When the latter are involved, there is likely a connection with Iran-backed terror group Hezbollah, he adds.

Lebanon-based Hezbollah has been lobbing missiles into neighboring Israel since the Jewish state began bombing Gaza following the Hamas terror attack, which killed more than 1,400 Israelis. 

“We have seen links with the Chinese money launderers dealing with the Lebanese money launderers, so we believe there is some sort of money-laundering connection” to marijuana sold at some illegal shops, said Urben, who worked for the federal Drug Enforcement Administration for 25 years.

There are only 11 licensed Cannabis shops in the city — and just 26 in the entire state.Paul Martinka

In 2015, US Attorney General Preet Bharara busted 10 dealers of synthetic “K2” marijuana across New York City that used a network of bodegas to peddle the Chinese-made drugs. The synthetic weed was divided into 260,000 packets and sold for $5 a pop “where they sell milk and candy,” Bharara said at the time.

Defendants in the case — several of whom entered plea deals on conspiracy charges and served jail sentences between four and 12 months — were mostly of Yemeni origin. No specific accusations of funding terrorism were ever brought against those defendants.

Yemen in the mix

Nevertheless, federal agents in recent years have gathered evidence that cash from K2 drug sales across New York City has helped fund Yemen-based Houthi fighters, according to Urban. There are 6,000 Yemeni-run bodegas in the Big Apple out of 13,000 citywide, according to the Yemeni Merchants Association.

“A significant part of the synthetic narcotics that were being sold in recent years through New York gas stations and bodegas, and there is a significant likelihood that significant dollars from those sales were sent to Houthi militias,” Urben said.

Last week, Houthis made headlines when they fired multiple missiles at Israel following the Hamas attacks on Oct. 7. The missiles were shot down by a US Navy warship, the Pentagon said.

A Yemeni lifts a portrait of Houthi leader Abdul Malik al-Houthi during a ceremony last month.AFP via Getty Images

Hezbollah has trained and armed the Houthis during their yearslong war against Saudi Arabia in Yemen. The Houthi leader recently said the group was ready to coordinate with Hezbollah if the US intervenes in Gaza.

The Yemeni Merchants Association, which represents many of New York City’s smoke shops in addition to the 6,000 bodega owners, didn’t return calls seeking comment.

The group has said at City Council hearings that its smoke shop owners want to be licensed, according to public testimony.

Missiles fired from Yemen that may have been directed at Israel were downed by this Navy warship last week.

“They want to avoid police raids,” said Paula Collins, a lawyer who represents may of the city’s pot shop owners. “People are tired of the life.”

Collins denied that any of her Yemeni clients were behind any network involved in nefarious schemes.

“There are little groups owning three to four shops,” Collins told The Post. “Most of the Yemenis I know are hardworking and scrimped and saved to get here. I just don’t see the connection.”

Nevertheless, Collins admitted the owners have problems finding a place to stash their mounds of cash because most banks will not accept money from cannabis companies since it is still illegal on a federal level. 

Those banks that do deal with cannabis-related funds charge thousands of dollars for basic services including checking accounts, she said.

“Welcome to the world of cannabis,” Collins said.

With Carl Campanile

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