Advanced AI Chip Smuggling Scheme Exposed: Three Men Charged

Three individuals affiliated with server maker Supermicro face serious charges for allegedly smuggling advanced Nvidia chips into China, violating U.S. export controls

Introduction to the Allegations

The U.S. Attorney for the Southern District of New York has indicted Wally Liaw, Steven Chang, and Willy Sun for conspiring to smuggle advanced Nvidia chips into China. The indictment alleges that the three men conspired to sell $2.5 billion worth of servers to a company based in Southeast Asia, which then repackaged the boxes to send $510 million worth of servers with banned chips to final destinations in China.

The Charges and Penalties

The three men are each charged with a count of conspiring to violate the Export Controls Reform Act, carrying a maximum prison term of 20 years, if convicted. They also each face one count of conspiring to smuggle goods and one count of conspiring to defraud the United States, each count carrying a maximum prison term of five years. The Department of Justice said Liaw, a U.S. citizen who co-founded Supermicro, and Sun, a citizen of Taiwan, were arrested, while Chang, also a citizen of Taiwan, remains a fugitive.

Background and Motivations

In 2022, the U.S. tightened its export controls on selling advanced artificial intelligence chips to China, citing national security concerns. The bans covered Nvidia’s B200 and H200 graphics processing units, among the company’s most advanced AI chips, and only allowed sales to China through a license granted by the government. The three men are charged with selling servers, without a license, to China that included B200 and H200 GPUs. According to U.S. Attorney Jay Clayton, “They did so through a tangled web of lies, obfuscation, and concealment — all to drive sales and generate revenues in violation of U.S. law.”

Reactions and Consequences

Supermicro was not named in the indictment, but the company confirmed the roles of the three individuals. In a statement, the company said the two employees are on administrative leave and the relationship with the contractor has been terminated, effective immediately. The company's stock price plunged in pre-market trading, down more than 25%. Nvidia also released a statement, emphasizing that strict compliance is a “top priority,” and that it is working with customers and the government on compliance programs. The alleged scheme has raised concerns that banned chips are slipping into China, oftentimes “transshipping” to China through nearby countries like those in Southeast Asia.

Top Stories

Recent Articles

More Articles