Jacob Arabov in his 57th Street store. Inset: Jewelry from Jacob & Co.

The king of bling, Jacob Arabov, founder of Jacob & Co., was arrested Thursday on federal money laundering charges at his 57th Street flagship here.

NEW YORK — The king of bling, Jacob Arabov, founder of Jacob & Co., was arrested Thursday on federal money laundering charges at his 57th Street flagship here.

Federal prosecutors charged that Arabov, 41, participated in a scheme to launder more than $270 million in illegal narcotics proceeds involving a Detroit-based drug organization called the Black Mafia Family. He was named in a superseding indictment of 16 people that was returned May 10 and unsealed on Thursday.

The original indictment last year alleged that 25 people operated the cocaine ring, starting in the Nineties, in the Detroit metropolitan area, and that the operation eventually spread to California, Texas, Kentucky, Georgia and Missouri.

Arabov, who uses the surname Arabo professionally, was charged on one count of money laundering. He was accused of selling jewelry that was purchased by alleged ringleaders Terry Lee Flenory, Demetrius Flenory and others. Members of the drug organization would deposit “large amounts of cash derived from the sale of cocaine into various bank accounts; purchase cashier’s checks and money orders and wire transfer these funds,” the U.S. Attorney’s office for the Eastern District of Michigan said in a statement. “These funds would then be used to purchase assets and pay personal expenses with the goal of concealing the true source, nature and ownership of the funds.”

Prosecutors alleged that Arabov, whose over-the-top diamond jewelry and watches are status symbols in the hip-hop world, failed to notify the Internal Revenue Service after receiving large sums of currency, money orders and cashier’s checks.

Authorities have seized a number of Jacob & Co. products, including a platinum watch with diamonds, a rose gold watch and a custom-made platinum necklace with 107.2 carats of Asscher-cut diamonds.

If convicted, Arabov faces as many as 20 years in prison. He pleaded not guilty and has been released on bail.

Attorney Benjamin Brafman, who is representing Arabov, said in a statement that the arrest “is the result of an unfortunate misunderstanding that we believe will be straightened out in the next several weeks. We are confident that once the government is advised of all the facts surrounding these issues, that all of the charges against Mr. Arabov will be completely dismissed.”

This story first appeared in the June 16, 2006 issue of WWD. Subscribe Today.

Arabov, a native of Tashkent, Uzbekistan, started his fine jewelry business on West 47th Street 20 years ago. He rose to fame in the late Nineties after Faith Evans, then-wife of rapper Notorious B.I.G., told her husband about Arabov, garnering him a cult-like following with entertainers who sang about him as their ambassador of bling and included him in their music videos.

His oversized diamond-laden and complicated watches and custom-made jewelry pieces are favored by performers such as Beyoncé Knowles, Lil’ Kim, Jay-Z, Pharrell Williams, Diddy and Jessica Alba. Jacob & Co.’s target demographic now extends from corporate types to Hollywood heavyweights.

In 2004, Arabov purchased a Manhattan town house at 48 East 57th Street to house his boutique, which is designed to look like a diamond mine with its striated white Corian walls. The building also houses the firm’s sales office, watchmaker shop and jewelry repair facility.

Last year, Arabov launched his first formal women’s jewelry line, available exclusively at the firm’s sole store, with prices starting at $3,000. Jacob & Co. watches are sold at the store, as well as through a few independent fine jewelry and watch stores.

This spring, the company rolled out an advertising campaign, shot by Rocco Laspata and Charles Decaro, touting women’s jewelry and watches and starring model Helena Christensen.

Arabov is also on the tech forefront. In March, the firm launched the Quentin, the world’s first watch with a 32-day power reserve, a major feat in the world of Swiss watchmaking.

In November, Arabov told WWD that his ultimate goal is to have the cachet, venerability and ubiquity of major Fifth Avenue jewelers like Harry Winston, Cartier and Van Cleef & Arpels.

“When you come to Jacob & Co., it’s not just bling, it’s an invitation,” said Arabov at the time. “Everything that I make, you will never see me copy.”

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