On March 15, 2008, a fireball shot into the midday sky over Albania's capital, Tirana. The blast echoed 100 miles away in Macedonia and Kosovo. Its force was comparable to that of a small nuclear weapon. But this wasn't atomic. It was an accident at an arms depot, where poor villagers had been hired to handle old ammunition and artillery shells. The explosion killed at least 26 people and injured hundreds. The village of Gerdec was obliterated.

Three men were arrested for mass murder in what local media dubbed "Albania's Hiroshima." Two of them were alleged accomplices to a 23-year-old Miami Beach-based arms dealer named Efraim Diveroli, who faces trial later this year on 83 counts of fraud and conspiracy for procuring Chinese-made ammo in Albania and selling it to the Pentagon.

The charges might be difficult to prove, though. A potential lead witness in the case, Kosta Trebicka, mysteriously died in September. His body was found bloodied and sprawled across a dirt road in eastern Albania, some 50 yards from his slightly dented SUV. Trebicka had recorded a tape (now available on YouTube) in which Diveroli said corruption in that country "went up... to the prime minister and his son."

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Last week, Miami federal prosecutors retreated, allowing the return of $4.2 million of Diveroli's property — including a new Mercedes S550 — that had been confiscated. Perhaps even more significant, Diveroli is out on bail and a Miami Beach company he owns called Ammoworks might even now be selling ammunition to the American government. This fact has been largely overlooked by prosecutors and Congress.

Efraim Diveroli comes from a family that includes arms dealers and a celebrity holyman. An uncle, Shmuley Boteach, is a former reality-TV host on TLC, a friend of Oprah's and Michael Jackson's, and the best-selling author of Kosher Sex and Dating Secrets of the Ten Commandments.

Diveroli grew up in Miami Beach and went to work at age 16 for another uncle, Bar-Kochba Boteach, who ran an arms dealership in South Central Los Angeles.

Diveroli then moved to Miami and took a job with his dad's arms company, AEY Inc. Within a year, at age 19, he became president. Along with a childhood buddy and two-time college dropout named David Packouz (who moonlighted as a masseur), he accrued a litany of government contracts. In 2006, for instance, AEY shipped several million dollars' worth of clothing, weapons, and even firefighting equipment to government agencies, according to a website called fedspending.org.

Soon, AEY was placed on a U.S. blacklist. The firm was being investigated for "numerous violations of the Arms Export Control Act and contract fraud," according to a congressional report issued last year. In addition, it was accused of performing substandard work on at least 11 government contracts, which were ultimately withdrawn or terminated. According to the report: "Government contracting officials repeatedly warned of 'poor quality,' 'damaged goods,' 'junk' weapons, and other equipment in 'the reject category,' and they complained on several occasions that AEY was 'hurting the mission' and had 'endangered the performance' of government agencies."

Nevertheless, in January 2007, the firm won a blockbuster $300 million contract with the Defense Department to supply ammunition to Afghanistan for that nation's antiterrorism effort. AEY would provide the police and national army with the bulk of their bullets. Suddenly, the firm was the largest arms supplier to a key ally.

Diveroli found much of the ammo in Albanian arms dumps. Some of it dated back decades and came from China. Unfortunately, selling Chinese-made war material to the Pentagon is illegal because of a 1989 arms embargo. Diveroli emailed the State Department in 2007 to ask if he could ship Chinese ammo. When the reply was no, federal prosecutors charge, Diveroli removed the Chinese packaging and passed off the ammo as Hungarian.

Diveroli allegedly hired two of the men accused of mass murder at Gerdec to run the repackaging process at Tirana's Mother Teresa International Airport. The ammo, which was corroded and often unusable, was removed from sealed canisters and packaging marked "Made in China." It was then dumped into cardboard boxes and shipped to Afghanistan. Sometimes bullets spilled in transport.

Businessman Kosta Trebicka, who died in eastern Albania, was also involved in the operation. When Trebicka was fired, he blew the whistle on Diveroli and agreed to secretly record cell phone conversations.

In the tapes, Diveroli tells Trebicka to bribe one of the ammo repackagers. "Send one of your girls to fuck him," Diveroli says in a recording posted on YouTube and quoted by the New York Times. "If he gets $20,000 from you, I can live with this."

Then Trebicka alludes to the CIA. "Probably I will be invited in Washington, D.C., by the CIA guys and my friends over there," he says. "Two weeks from now, I will come to Florida to shake hands with you and discuss future deals." Not long after this, Trebicka turned up dead. The Albanian government ruled it a car accident, but skeptics question that finding.

March 2008 was disastrous for Diveroli. On the 27th, the Times, acting partly on Trebicka's leads, accused the company of supplying Chinese ammo to the Pentagon in violation of federal law. The next day, the U.S. government suspended AEY from further contracting work. In a letter announcing the suspension, Pentagon officials warned, "It is reasonable to believe that both Mr. Diveroli and AEY will seek to obtain similar work in the future, either directly or as a representative of another contractor."