In 1937, the East Coast mob sent Siegel to California to develop syndicate gambling rackets with Los Angeles mobster Jack Dragna. Once in Los Angeles, Siegel recruited gang boss Mickey Cohen as his lieutenant. Siegel used syndicate money to set up a national wire service to help the East Coast mob quicken their returns.
Siegel moved Esta and their two daughters, Millicent and Barbara, to California. On tax returns he claimed to earn his living through legal gambling at Santa Anita Park near Los Angeles.
On November 22, 1939, Siegel, Whitey Krakower, and two other gang members killed Harry "Big Greenie" Greenberg. Greenberg had become a police informant, and Louis "Lepke" Buchalter, boss of Murder, Inc., ordered his killing. Siegel was tried for the Greenberg murder. Whitey Krakower was killed before he could face trial. Siegel was acquitted but his reputation was in ruins. During the trial, newspapers revealed Siegel's past and referred to him as "Bugsy". He hated the nickname (said to be based on the slang "bugs", meaning "crazy", and used to describe his erratic behavior), and wouldn't be called "Bugsy" to his face.
It is said that after his death Mickey Cohen went to the Roosevelt Hotel, where he believed the hitmen to be staying and fired rounds from his two .45 caliber semi-automatic handguns into the lobby ceiling and demanded that the assassins meet him outside in ten minutes. However, no one appeared and Cohen was forced to flee when the cops arrived.