Woody Toys, based in City of Industry, is accused of stuffing the money inside plush toys before sending them south of the border.
The company was a player in an international scheme to convert U.S. dollars into Mexican pesos at a rate of millions of dollars per year, according to U.S. Immigration and Customs Enforcement (ICE) officials.
According to court documents, a Woody Toys customer told a confidential informant that he managed to get cheap exchange rates by buying "narco money."
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Those indicted and arrested are co-owners Jia "Gary" Hui Zhou and Dan "Daisy" Xin Li, both 43; accountants Kit Yee Lam, 51 and Jazmin Contreras, 33; sales manager Anabel Rufino, 32; as well as Guadalajara, Mexico-based clients Jose Miguel Yong-Hinojosa, 26, and Luis Ernesto Flores Rivera, 53.
The money laundering charge carries a sentence of up to 20 years in prison, according to ICE officials.