Arrests Made as Millions of Nvidia Chips Smuggled into China
Two Chinese nationals have reportedly been arrested and charged with orchestrating a sophisticated scheme to illegally export millions of dollars' worth of Nvidiaās advanced AI chips to China, circumventing US President Donald Trumpās strict trade restrictions.
The US Department of Justice alleges that Chuan Geng and Shiwei Yang operated California-based ALX Solutions as a front for shipping restricted technology to China without proper licences across a period of three years.
It has been revealed that the pair coordinated shipments of Nvidia's H100 GPUs and GeForce RTX 4090 GPUs to China through countries including Singapore and Malaysia.
Filings from the court state that āneither ALX Solutions nor Geng or Yang applied for or obtained a license from the Commerce Departmentā, making their operation illegal in the US.
Complicated financial arrangements which saw ALX Solutions ship goods to firms in Singapore and Malaysia but receive payments from separate companies based in Hong Kong and China were cited as the evidence needed for conviction.
One payment alone totalled US$1m from a China-based firm in January 2024, according to the prosecutors.
Inside the smuggling operation
The scheme involved falsifying end-user information to major suppliers including Super Micro Computer, with one 2023 invoice valued at more than US$28.4m allegedly declaring the chips were destined for a Singapore-based customer.
However, US export control officers discovered the named Singapore company did not exist at the listed location, and the chips appeared to have been diverted to different end users entirely.
"It appears that ALX Solutions shipped the Nvidia products to different end users," the court documents state.
It is reported that Geng, a California permanent resident, handled the company's finances whilst Yang, who had allegedly overstayed her visa, served as secretary.
The DOJ noted that both Singapore and Malaysia are frequently used as transit hubs to "conceal illegal shipments" to China.
The response of Nvidia and the suppliers
Nvidia has responded firmly to the allegations, with a spokesperson stating that smuggling chips āis a non-starterā.
The company emphasised its compliance framework, noting that it "sells products to well-known partners who help to ensure that all sales comply with US export control rules".
Nvidia warned that "any diverted products would have no service, support or updates", highlighting the risks faced by those attempting to circumvent official channels.
Super Micro Computer, named by the courts as an unwitting supplier in the scheme, told the BBC it was "firmly committed to compliance with all US export control regulations" and that it would cooperate with authorities.
A symptom of broader geopolitical tensions
The case underscores the ongoing technological rivalry between the US and China, with Washington implementing increasingly strict export controls on advanced semiconductors.
These restrictions aim to prevent China from accessing cutting-edge AI technology that could have military applications or enhance Beijing's technological capabilities.
While Nvidia’s CEO Jensen Huang negotiated a deal with President Trump and Chinese authorities to allow his company to restart exports of its H20 chips to China in July, the trade of the firm’s most powerful technologies is still prohibited.
Following the negotiations, Jensen Huang said: “The Chinese market is massive, dynamic and highly innovative and it’s also home to many AI researchers.
“Therefore, it is indeed crucial for American companies to establish roots in the Chinese market.”
The H100 chips at the centre of this case are particularly significant, as they are some of the most advanced processors available for AI applications.
Yang was arrested on Saturday whilst Geng surrendered to authorities shortly thereafter.
Both appeared in federal court in Los Angeles on Monday and face potential sentences of up to 20 years in prison if convicted.
The case demonstrates the lengths to which some actors will go to circumvent export restrictions, whilst also highlighting US authorities' determination to enforce these controls through criminal prosecution.
For technology companies operating in this space, the case serves as a stark reminder of the severe consequences of export control violations in an era of heightened US-China tensions.
