I believe we've had a stumble of vernacular here.
The Sale of the hand guns was legal--by the FFL--the purchase, for resale--by the various buyers being the illegality.
Making a straw purchase being explicitly called out on the 4472 as a prohibition for the sale.
Now, the assertion that there is a 'pipeline,' in the singular, is presented as rather a fait acompli, a per se truth. Which, sadly seems to be the extent of modern journalism--come to a conclusion and toss words at it to that end.
It is a fascinating example of how creating new laws only affects the law abiding. Everyone in this alleged "pipeline" knew they were "dirty." This did not deter them in the slightest.
There is clearly a huge market for firearms in restrictive places like NYC, Chicago, etc., and the profits well outweigh the illegality of it--such is human venality.