In the summer of 1982, DeLorean received a phone call from James Hoffman, a former drug smuggler turned FBI informant. DeLorean met with Hoffman on July 11, 1982, to discuss an investment opportunity to help save his company. Over the course of the next three months, Hoffman slowly explained his intricate plan involving cocaine smugglers, a bank for laundering money, and the specifics of how much money DeLorean would be required to front to procure the deal. DeLorean went along with these discussions, planning to trade DMC stock for the seed money for any deal that would benefit the company, but leaving the drug-smuggler investors with stock in a company completely controlled by the British government. On October 19, before going to meet the investors to consummate the deal, DeLorean wrote a letter to his attorney and sealed it, with instructions to open it only if he did not return. The letter explained the situation he was in and his fear for his family's safety if he tried to back out of the deal. On October 19, 1982, DeLorean was charged with trafficking in cocaine by the U.S. government.
Before the trial began, the FBI's videotape of the sting was leaked to the media by Hustler Magazine publisher Larry Flynt. In the videos, when arresting DeLorean, an FBI agent is shown asking him whether he would rather defend himself or have "his daughter's head smashed in."[13] This prompted the judge to postpone the trial until the following year because of undue bias from the leaked tape.
DeLorean successfully defended himself with a procedural defense, arguing that the police had asked him to supply the money to buy the cocaine. His attorney stated in Time (March 19, 1984), "This [was] a fictitious crime. Without the government, there would be no crime." The DeLorean defense team did not call any witnesses. DeLorean was found not guilty due to entrapment on August 16, 1984.