US DOJ Charges Three for Illegally Selling AI Chips to China

U.S. federal prosecutors have charged three people linked to AI server producer Super Micro Computer, including one of its founders, with orchestrating the illegal transfer of American AI technology to China, in breach of export regulations. 

According to the Justice Department, the alleged scheme involved the covert transfer of at least $2.5 billion in advanced server equipment. While prosecutors did not initially identify the company in court filings, Super Micro later confirmed it had been notified of the indictment and said it has cooperated fully with investigators. 

The case, unsealed in a Manhattan federal court, names Ting-Wei Sun, Yih-Shyan Liaw, and Ruei-Tsang Chang. The scheme allegedly routed U.S.-built servers through Taiwan and parts of Southeast Asia before ultimately delivering them to China. Authorities claim the equipment was repackaged in unmarked containers along the way to obscure its origin and destination. 

Restrictions on exporting advanced AI chips to China have been in place since 2022, part of broader efforts by Washington to limit Beijing’s access to sensitive technologies. 

Investigators say the accused went to considerable lengths to bypass these controls. FBI’s James Barnacle alleged that the defendants relied on falsified records and staged equipment to deceive auditors. He added that they also used intermediary businesses to disguise the true end users of the technology. 

Prosecutors further claim the group went as far as physically altering hardware, using tools such as hair dryers to remove identifying labels and transfer them onto decoy units left behind. 

Liaw, 71, an American citizen and longtime industry figure, was taken into custody in California along with Sun, 44. Chang, formerly a sales manager in the company’s Taiwan office, has not been apprehended and is believed to be on the run. Liaw has since been released on bail, while Sun remains in custody pending further proceedings. 

Following the charges, Super Micro said it had placed Chang and Liaw on leave and severed ties with Sun. The news triggered an 8% drop in the company’s stock. 

Officials have not specified which chips were part of the alleged operation, though Nvidia is widely recognized as a leading supplier in the AI chip market. The company reiterated its commitment to complying with export regulations and said it works closely with clients and regulators to ensure compliance. 

A spokesperson for Nvidia warned that attempts to divert restricted technology are unlikely to succeed, citing strict enforcement measures and a lack of support for systems obtained through illegal channels. 

Tech firms, such as D-Wave Quantum Inc. (NYSE: QBTS), are likely to be shocked that a cofounder of a company like Super Micro could be indicted on accusations of breaching technology export restrictions. 

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