In the stables at a prominent quarter horse track in New Mexico, workers quietly nicknamed Jose Trevino Morales's stables as the "Zetas' stables" and say they often saw people show up with bags of cash to buy the horses.

On Tuesday, authorities raided those stables and a horse ranch in Oklahoma accusing Trevino and others of running a sophisticated money-laundering operation connected to one of Mexico's most powerful and ruthless drug cartels.

Federal authorities accuse Trevino's older brother, Miguel Angel Trevino Morales, a key figure in the Zetas drug operation, of setting up the horse operation that the younger brother ran from the sprawling ranch near Lexington, Okla., south of Oklahoma City. Millions of dollars went through the operation, which bought, trained, bred and raced quarter horses throughout the southwest United States, including at the famed Ruidoso Downs track in New Mexico.

Jose Trevino, his wife and five others were arrested and charged with one count each of money laundering. Seven others, including another Trevino brother, were charged but remain at large. They could face up to 20 years in prison if convicted.

"This case is a prime example of the ability of Mexican drug cartels to establish footholds in legitimate U.S. industries and highlights the serious threat money laundering causes to our financial system," said Richard Weber, the chief of the IRS' criminal investigation unit.

The indictment, unsealed Tuesday, describes how the Trevino brothers and a network quietly arranged to purchase quarter horses with drug money at auction and disguise the source of the funds used to buy them so that the Zetas' involvement would be masked. They would often pay in cash, or use fake names, which helped keep the owners and the money a secret.

Since 2008, the operation racked up millions of dollars in transactions in California, New Mexico, Oklahoma and Texas, prosecutors said. The New York Times first reported the raids and the alleged connection to the Zetas cartel, citing a months-long investigation and several anonymous sources.

The operation, Tremor Enterprises LLC, started small, but worked in plain sight. Some horses carried names with drug references, like Number One Cartel and Coronita Cartel. Over time, the horses and the operation earned a place on some of the most elite stages in the industry. One horse named Mr. Piloto won a $1 million prize at Ruidoso Downs on Labor Day 2010, going off at odds of 22-1. His trainer, Felipe Quintero, 28, was one of the seven arrested Tuesday.

The Zetas are one of Mexico's most powerful drug cartels, with a reputation for being willing to commit atrocities including kidnapping, decapitating and dismembering enemies. The elder Trevino is the second-in-command and one of the U.S. and Mexican governments' most wanted men, known for his brutality.

One technique favored by Miguel Angel Trevino Morales is the "guiso," or stew, in which enemies are placed in 55-gallon drums and burned alive.

Underscoring the violence, the U.S. Embassy in Mexico issued a travel advisory Tuesday, warning that the arrests could result in some form of retaliation and urged U.S. citizens in Mexico to maintain a low profile.

Jose Trevino and his horse operation in the United States appeared to work with little fear of getting caught by authorities. Three stable workers at the Ruidoso Downs Race Track and Casino told The Associated Press on Tuesday that Trevino's stables were known as the "Zetas' stables," and two of the workers described seeing people from Mexico show up to the stables with duffel bags of cash to purchase horses. The AP agreed to let the workers, who refused to give their names, speak anonymously because they feared retaliation from the Zetas cartel.

It wasn't just the cash purchases that caught the attention of those in the quarter horse racing industry. The amount of money Trevino and his network paid for horses also raised eyebrows.

Debbie Schauf, the director of the Oklahoma Quarter Horse Racing Association, said Jose Trevino showed up a few years ago and quickly earned a reputation for always paying his bills and shelling out handsome prices for some of the top horses in the country. Quarter horses are smaller but more muscular than thoroughbreds and can run short distances faster than other horses.

"They were also recognized for taking care of their business. They paid their bills and didn't cause any trouble. You didn't have a food vendor or veterinarian calling to say they couldn't get these guys to pay their bills. They were good citizens in the horse industry," she said.

While it was common for buyers based out of the country to pay cash for horses, she said several transactions were noteworthy for their value.

"It didn't raise a lot of eyebrows when these guys came to the sales and started paying cash. What raised eyebrows was the quality of the horses they were buying and the amount of money these mares cost," Schauf said.

Prosecutors asked that no bond be set for Trevino fearing he would either flee or intimidate witnesses. Neither Trevino nor his lawyer, Tony Lacy, commented, and a lawyer for Zulema Trevino said he knew little about the case.

U.S. Magistrate Robert Bacharach appointed lawyers for the pair after they said the government was trying to seize all their property.

"I don't have any assets as of today," Trevino told the judge.

During the raids Tuesday, dozens of federal agents swarmed the New Mexico race track, wearing bulletproof vests and collecting evidence. At least two horses were taken away. Shaun Hubbard, general manager of the Ruidoso Downs Race Track and Casino, said the track officials are cooperating with federal authorities.

Seizure warrants were issued for 41 horses deemed the operations' most valuable, in an effort to prevent their being taken to Mexico. Among those was Mr. Piloto. The government sought an order to ensure the care of 384 other horses at the ranch, which sits among rolling hills about 40 miles south of Oklahoma City.

At least a half-dozen agents wearing military-style fatigues and baseball caps emblazoned with FBI stood by at the ranch Tuesday afternoon as horses roamed on crisply manicured lawns. Telephone messages left at the ranch were not immediately returned.

Neighbors said the ranch changed hands about a year ago, but few knew the couple well.

Chelsey Krueger, a student at Oklahoma City Community College who lives just south of the ranch, said she had never met the owners but knew when they were around.

"They were always in a Suburban, driving around with really loud music. They had a spotlight (at the ranch) that would be on late at night and light up the whole area," she said.