At 3:30 a.m. on Sunday, Israeli police say, authorities arrested five Palestinian antiquities dealers in Jerusalem and confiscated items dating back thousands of years from their homes and shops: papyrus fragments from the Egyptian Book of the Dead, the bust of an Etruscan woman, a fresco from Pompeii depicting swimming fish. They also seized more modern objects — two black luxury Audi vehicles — and more than $200,000 in cash.

NPR has learned the reason for the early Sunday morning arrests: Israel's Antiquities Authority says the dealers were involved in sales of antiquities — including items that U.S. authorities determined were smuggled — to Hobby Lobby, the national U.S. arts and crafts chain.

The arrests could have a chilling effect on Jerusalem's storied antiquities market, making it harder for pilgrims, tourists and high-end collectors to legally own a piece of history from the land of the Bible.

Police say the dealers' total antiquities sales to Hobby Lobby president Steve Green took place from 2010 to 2014 and added up to some $20 million.

On Sunday, Israeli police and tax authorities issued a statement saying the dealers provided fictitious invoices for the sales and an American allegedly used the invoices to receive large-scale tax breaks — and paid dealers kickbacks in return. They declined to name the American.

But later in the day, in a court hearing, Israeli police said the arrested Jerusalem antiquities dealers are suspected of tax evasion for failing to report the $20 million in earnings to Israel's tax authority — and are also suspected of money laundering for an alleged scheme in which fictitious receipts and invoices were issued for antiquities sold to Green.

A spokesperson for the Hobby Lobby and lawyers for the dealers have not yet responded to NPR's request for comment. The United States Attorney's Office in the Department of Justice declined comment.

Israel is the only country in the Middle East that has a legal antiquities trade for export, allowing the sale of items not deemed to be exceedingly rare — like 2,000-year-old coins from the time of Jesus, ancient oil lamps and Roman glass vessels.

But Israel's Antiquities Authority has been tightening its regulation of licensed antiquities sellers in recent years to prevent trafficking of looted objects, and Sunday's arrests appear to up the ante.

"This looks to me like the beginning of the end of the legal business in Israel," said David Hendin, a biblical coin expert and vice president of the American Numismatic Society. "It's the biggest step yet in the shutting down of what's left of the legal trade."

The arrested dealers, Palestinian residents of Jerusalem, come from some of the most important pillars of Jerusalem's antiquities market. The suspects, according to a court document, include a scion of the Baidun family, a dominant figure in the market trading in ancient artifacts for some 80 years. Other suspects are from the Hroub and Barakat families, also giants in the local market.

The arrests send a clear message to Israel's antiquities dealers, who are licensed by the government, that they will be closely monitored, Hendin says. The message from the authorities, he says, amounts to this: "We're not only going after you for the antiquities. We are watching your checkbooks. We are going to go after you guys, where you work and where you live."

Earlier this month, the owners of Hobby Lobby, based in Oklahoma City, agreed to pay $3 million and forfeit thousands of ancient artifacts from Iraq that U.S. prosecutors say were smuggled out of the Middle East and intentionally mislabeled when imported to the U.S.

The Hobby Lobby owners, the Green family, are devout Christians and some of the world's largest collectors of biblical antiquities. Much of their collection is expected to be displayed this fall when they expect to open theirMuseum of the Bible in Washington, D.C.

According to U.S. law enforcement, in July 2010, Hobby Lobby president Steve Green inspected more than 5,548 artifacts for sale in the United Arab Emirates. Three antiquities dealers — two identified as Israeli, the other from the United Arab Emirates — were present as Green looked at tablets with ancient Mesopotamian writing, clay seal imprints and other items.

One Israeli dealer provided a statement to Green saying the dealer's father legally acquired the artifacts in the late 1960s. An expert warned Hobby Lobby against the purchase of artifacts likely from Iraq, saying that hundreds of thousands of artifacts have been looted from Iraq since the 1990s.

But through its president, Green, Hobby Lobby proceeded to purchase the items for $1.6 million. U.S. officials say there were false invoices and false labels provided when the items were shipped to the U.S. in order to avoid Customs scrutiny. After its settlement with U.S. authorities, the Green family acknowledged in a statement that it "should have exercised more oversight."

With Sunday's arrests, Israeli authorities are shining a spotlight on the murky Middle Eastern antiquities trade, which the Hobby Lobby owners have depended on for their collections.

Last year, the Antiquities Authority says, the U.S. Department of Homeland Security contacted Israeli authorities and provided them with information on Hobby Lobby's purchase of antiquities from Israeli-licensed dealers, including evidence of money transfers.

"It lit a red light," said Eitan Klein of the Antiquities Authority.

Most of the suspect antiquities were shipped to the U.S. from the United Arab Emirates. But in September 2011, a dealer in Jerusalem shipped 1,000clay seal imprints, called bullae, to the U.S.

Klein said items had been shipped legally from Dubai to Israel in 2011, and therefore the dealers did not break Israeli law at the time when they shipped the objects to the U.S.

Copyright 2017 NPR. To see more, visit