I've always heard shady used as a synonym for disingenious, similar to dodgy in British English- in regards to a dealer/source it would mean they were liable to lie, cheat or doublecross you in a deal. A shady dealer is one who might just as soon rob you at gunpoint than give you the stuff, or try to pass off something cut down with oregano or baby powder, or in the case of cigars, a glass-top box of cohibos. Now that's shady. Since it's a term that originated in a context where flouting the law is an accepted part of the game, simply doing something illegal doesn't make you shady- it's breaking the compact of trust with the customer that does. So in that sense, none of my sources are in the least bit shady.
