The founder of a Washington private intelligence company is in deep trouble with the feds for his alleged willingness to take on a risky new client: a Mexican drug cartel.

On Wednesday, federal law enforcement raided the house and seized the electronics of executive Michael Bagley in connection with a money-laundering investigation. Federal prosecutors charged Bagley with money laundering after he allegedly helped confidential FBI sources posing as narco cartel representatives hide what he thought was more than $250,000 in illicit proceeds, according to court documents.

Bagley’s attorney declined a request for comment from The Daily Beast.

Bagley is the founder of the Washington, D.C., private intelligence firm Jellyfish Partners, which launched in 2011 by bragging that it had hired up veterans of private mercenary firms like the infamous Blackwater. Bagley boasted that the company provided “sophisticated intelligence operations services to Chief Executive Officers” looking to “execute their business strategies with complete awareness of the international business environment.” He told interviewers that his company had informants “from Bogota to Belgrade, Somalia to South Korea” and hinted at big-name clients like Philip-Morris.

According to the FBI, Bagley allegedly tried to sign up an altogether shadier clientele and collect a 10 percent commission by laundering a quarter-million dollars worth of drug money. Court documents don’t reveal how Bagley first came to the feds’ attention, but they say he fell for their sting operation. Court papers allege he met with people he believed to be cartel envoys in a San Diego hotel in January and offered to use a fictitious "invoice for software" for an “Enfuego Software Package” to help the narcos launder over $20 million in cash through a company called “Black Knight Enterprises.”

Rather than set up a single $20 million transfer, the government’s informants strung Bagley along and claimed that they would rather start with smaller amounts to launder and later increase it. At a meeting in Tysons Corner, Virginia in February, Bagley allegedly proposed using a GoFundMe account to launder money via a practice known as “smurfing” that involves routing money through a series of smaller and seemingly innocuous transfers.

Over the course of three transfers from April through June, the FBI’s sources transferred over $250,000 in cash to Bagley, which he allegedly deposited in a bank as part of the laundering scheme. During the execution of a search warrant at his house on Wednesday, prosecutors say Bagley signed a confession that he took money from people he believed to be cartel representatives and laundered the money for them.

Federal law enforcement employed at least two confidential sources to set up the apparent sting operation. One source had previously assisted the government in identifying "multiple money laundering suspects" and the second source cooperated while facing unspecified criminal charges. Court documents imply that the FBI was able to record Bagley’s meetings with the two sources throughout their meetings in Virginia and San Diego.

Prosecutors allege that Bagley may have also had a working relationship with a real cartel boss, in addition to the fictitious ones used in the sting. In a detention memo, prosecutors wrote that he allegedly told the government’s informants, "I wanna let you know that I'm also moving for [Ismael "El Mayo" Zambada] in Mexico City as well, with his number one guy."

Zambada, or “El Mayo” as he’s known, is said to have taken over the Sinaloa cartel after Mexican authorities arrested his infamous predecessor, Joaquin “El Chapo” Guzman, and extradited him to New York for trial.

FBI agents say that when they interviewed Bagley during the search of his home, he claimed he had lied about his connections to the Sinaloa cartel. Bagley said his actions in the sting were the only time he has ever done something like this” and that he “was not involved in any other large-scale criminal conspiracies,” according to one FBI account of the interview.

In addition, court documents allege that Bagley "claimed to have a network for 'mirroring'”—a money laundering tactic which involves "transferring money between parties outside of the banking system"—based in Mexico City.

Bagley allegedly told the FBI agents the money laundering operation was a way for him to take care of his expenses and fund an idea of his for “micro cities” in Mexico. That plan involved building small-scale housing for migrants, a project he first pitched for Syrian refugees and later refocused on Mexico after the Obama administration rejected his proposal.

Prosecutors asked a federal judge to deny bail on the grounds that Bagley is a flight risk because of his allegedly “substantial ties” to Mexico. They cited recent travel—approximately nine trips—for extended periods and his alleged work for a real Mexican cartel boss. A hearing to determine if he should stay in custody is scheduled for Thursday afternoon.

A 2013 Mother Jones article which touched on Bagley’s role in Washington’s private intelligence industry, highlighted the apparently booming industry of corporate information-gatherers, then estimated at around $400 million. Nonetheless, court documents paint a picture of a man who appears to have fallen on hard times. FBI documents claim Bagley “has been unemployed for a while,” that his wife “has supported him financially for the last 10 to 12 years,” and that Jellyfish “does not have any employees, nor does it have an office.”