U.S. Justice Dept. Uncovers Nvidia Chip Smuggling Scheme to China

Two men, Fanyue Gong and Benlin Yuan, are charged with smuggling Nvidia chips to China by circumventing U.S. export controls. They used intermediaries to disguise the chips as for third-country customers. Alan Hao Hsu previously pleaded guilty, and the operation had financial backing of $50 million.

The United States Justice Department has brought charges against two men, Fanyue Gong and Benlin Yuan, accusing them of illegally smuggling Nvidia H100 and H200 chips to China. This comes despite former President Donald Trump allowing Nvidia to export H200 chips to Beijing. The scheme reportedly involved collaboration with employees from a Hong Kong logistics firm and a China-based AI technology company, who are alleged to have worked together to sidestep U.S. export restrictions.

According to court documents, the suspects acquired the Nvidia chips using straw buyers and intermediaries, misrepresenting their intended recipients as being based in the U.S. or third countries like Taiwan and Thailand. They shipped the chips to various American warehouses, altered their labeling to reflect a non-existent company, and prepared them for shipping abroad. Yuan is accused of recruiting personnel to inspect these mislabeled chips and of facilitating conversations to create plausible stories for the seized items' release.

The operation is believed to have been active since November 2023, implicating Alan Hao Hsu and his company, who admitted guilt last month. Hsu's organization received significant funding from China, exceeding $50 million, to aid the illegal export operations of over $160 million in Nvidia chips. Nicholas J. Ganjei, the U.S. attorney for Southern Texas, emphasized the network's threat to national security, while Nvidia reassured its commitment to securing chips and curbing smuggling with government cooperation.