Chinese Nationals Exploit Loopholes in Marijuana Legalization

File photo of individual marijuana bags. Brendan Smialowski/AFP/Getty Images

The legalization of marijuana in various states has given rise to a chain of industries, including illegal cultivation, interstate trafficking, distribution, and money laundering; and the scale of the business is getting larger and larger. Some Chinese nationals are exploiting loopholes in the law to exploit the marijuana industry.

On Nov. 28, 2017, 54 Chinese nationals were arrested after Washington State Police raided a residence suspected of illegally growing marijuana. Approximately 35,000 marijuana plants estimated to be worth $80 million were seized. Investigators believe the illegally grown marijuana was primarily destined for U.S. East Coast markets, particularly New York.

In June, 21 people were accused of illegally growing and distributing marijuana in Colorado. The investigation found that Chinese social media apps played an active role in the drug proceeds being laundered back to the United States.

“To obtain more money, they must take advantage of the loopholes in the law,” said Ling Fei, a computer store owner in Brooklyn, New York, who told The Epoch Times Chinese-language edition that he is against legalizing marijuana as “once the door opens a little, they'll enter a gray area.”

Even in states that have legalized the cultivation of marijuana, operators have to apply for a license. The state government is trying to set up a “traceability system“ to track every legal marijuana plant from seed to sale. Each seedling must get a coded certificate issued by the state, and the entire growth information and even location must be recorded. The number of grams harvested at maturity will also need to be reported to the government.

According to Ling, many operators are not honestly following the law, “for example, the operator gets 100 identifiers for 100 plants, but he probably plants 1,000 plants, 10,000 plants.” He would operate illegal transactions under the legal cover, mixing the legal and illegal.

Some of Ling’s clients are in the marijuana business. Those who have a lot of experience growing marijuana sometimes explain to Ling how it works.

To prevent marijuana thieves and reduce the risk of being discovered by the government (which patrols fields with helicopters for outdoor cultivation), many operators have turned to renting homes or buying rooms to grow marijuana indoors using artificial light. The use of light bulbs and fans to control the ambient temperature is very costly and easy to detect, so some operators destroy or modify the electric meter, or connect directly to the grid without going through the meter, stealing public electricity.

Thus, the power company can only detect the huge consumption of electricity, but it is hard to find the source.

Gradually, as the scale of indoor marijuana cultivation enlarges, the black market of the marijuana industry becomes so active that the existing enforcement personnel are unable to keep up with a huge supply and demand market.

“You can’t catch so many people,” said Ling.

Interstate Operations See Higher Profits on the Black Market

Although some states have legalized the cultivation of marijuana, harvested marijuana still cannot be transported outside state borders, and interstate transportation and sale of the drug is a federal felony more serious than illegal possession and use of the drug.

The risk of transporting marijuana across states and exporting it from legal states to states where it is still illegal earns more money on the black market. In a 2017 paper (pdf) on the economic impact of marijuana legalization, researchers at the University of California’s Center for Agricultural Issues estimated that 80 percent of the marijuana grown in California is sold on the black market to out-of-state locations where the price is higher, and where it is never taxed or regulated.

On Oct. 13, 2020, Kim Chong Woo, Peng Cuodengzhu, and Zhogha Luoda were arrested and charged with interstate marijuana trafficking. Agents of the Department of Homeland Security Confiscated 1,200 pounds of marijuana, $490,000 in cash, and tools used to package the marijuana, according to the indictment of the U.S. Attorney for the Southern District of New York.

Ling mentioned that there are many underground money exchangers in the Chinese community, and it’s easy to circulate money. “They will find all means to get around those regulations (American law), thinking that ‘the chances of getting caught are slim.'”

“Americans think that a tough law will deter people from committing crimes. But the first generation of Chinese from China thinks differently. They calculate the opportunity cost and think ‘how can foreigners have such a stupid system?’ and think of ways to exploit the loopholes. If he is caught, he would react like buying a losing lottery ticket ‘Oops, what rotten luck!’” Described Ling.

According to Ling, those Chinese nationals who grow marijuana mostly don’t smoke it themselves and warn their children not to, but think it’s ok for other people, and that it’s just other people’s business. “They do it for the simple purpose of making money, and they don’t think about how the marijuana will get other kids addicted, or how it will harm America.”

Many Chinese people, due to the lack of moral education under the communist political environment, are accustomed to the CCP’s way of thinking, Ling said. Changing that kind of thinking is not easy and takes a long time, but the first things they need to do are to restore their values, build true faith, and have a good social environment, Ling said. “Chinese should pay more attention to public interests and welfare,” concluded Ling.