Sixteen people, including known associates to overseas terrorists, face charges in connection with a cigarette smuggling ring that flooded New York with more than a million carts of untaxed cigarettes and netted more than $55 million in illegal cigarette sales, prosecutors and federal officials said.

The 244-count indictment charges the suspects with enterprise corruption, money laundering and related tax crimes. Prosecutors say investigators seized more than 65,000 forged cigarette tax stamps and nearly 20,000 cartons of untaxed cigarettes during the year-long investigation.

The cigarettes were allegedly bought in bulk in Virginia and illegally resold in New York.  

Authorities recovered three handguns and more than $1 million in cash while executing search warrants in the suspects' homes and at storage facilities in four states.

Officials are investigating whether some of the profits may have been funneled to Hamas supporters in the Middle East. Some of the suspects arrested in the scheme are known associates to terrorists, officials said. They were known to the NYPD and it appears they were being monitored by the intelligence division when the fraud was unraveled, authorities said.

“By cheating New Yorkers out of tens of millions of dollars in tax revenue, this dangerous criminal ring was able to generate astounding profits that we are still continuing to trace,” Attorney General Schneiderman said. “Not only did this organized crime ring hurt law abiding mom-and-pop shops and other businesses in New York by putting those who do pay taxes at a competitive disadvantage, there is a very real concern about the possibility of violence related to this type of enterprise." 

Prosecutors said profits from similar schemes have been used to help fund terrorist organizations in the past.

-Shimon Prokupecz contributed to this report