Bling Sting

updated 07/03/2006 AT 01:00 AM EDT

originally published 07/03/2006 AT 01:00 AM EDT

Celebrity bling salesman Jacob Arabo—known as Jacob the Jeweler to clients such as Diddy, Lil' Kim, Elton John and Madonna—plans to fight the charge that he sometimes knowingly accepted drug money as payment for his wares. "He's obviously unhappy at this development, but is confident that he will be exonerated because he knows he did nothing intentionally to violate the law," says his attorney Benjamin Brafman.

Arrested inside his posh Manhattan store on June 15, Arabo, 41, was charged with one count of conspiring to launder funds for a Detroit-based drug gang called the Black Mafia Family. (If convicted, the Russian immigrant would face a maximum penalty of 20 years in prison and a $500,000 fine.) Forty other people were also indicted as a result of the investigation by several agencies, including the Drug Enforcement Administration, into the activities of the gang, which, according to the indictment, conspired to distribute more than 476 kilos of cocaine. Released on $100,000 bail, Arabo next faces a court date July 10 in Michigan. Says Brafman: "He will enter a plea of not guilty."

"The case is proceeding," says Stephen Murphy, U.S. attorney in Detroit. "It is a charge we take very seriously, and we find one of the most effective ways to go after drug dealers and to get to the root of it is to go after the cash in the pocket."

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