Federal prosecutors have charged a co-founder of Super Micro Computer Inc. and two associates with participating in a scheme to divert roughly $2.5 billion in advanced Nvidia chips to China, according to an indictment unsealed Thursday afternoon. The charges mark a notable escalation in Washington’s effort to police the flow of high-end artificial-intelligence hardware, shifting focus from overseas resellers to individuals with direct ties to U.S. technology firms.
The indictment alleges that the defendants obtained restricted graphics processors - used to train large AI models - and routed them through intermediaries to obscure their ultimate destination. U.S. export rules bar the sale of the most advanced chips to China without a license, citing national-security concerns.
U.S. prosecutors have charged three men - senior executive Yih-Shyan “Wally” Liaw (the co-founder), Ruei-Tsang “Steven” Chang, and Ting-Wei “Willy” Sun - with conspiring to divert billions of dollars’ worth of advanced U.S.-made AI servers to China, bypassing strict export bans.
The servers (packed with powerful restricted Nvidia chips) are banned from sale to China without special government approval because of national security risks. No licenses were ever obtained. Authorities say the group used a combination of third-party entities and altered shipping documentation to bypass those restrictions. Details on the volume and value of the shipments weren’t immediately available.
How the Alleged Scheme Worked:
- The group used a company in Southeast Asia as a front buyer to place huge orders with a California-based U.S. manufacturer.
- Once the servers arrived in Southeast Asia, they were quickly repackaged and secretly shipped to customers in China through a network of brokers.
Cover-Up Tactics:
- Fake documents claiming the Southeast Asian company was the real end-user.
- When audits happened, they staged warehouses with non-working “dummy” replica servers.
- One defendant allegedly posed as a lawyer during a U.S. government inspection.
- Text messages show they knew the rules were tightening but rushed shipments anyway (e.g., “We need to speed these up before May 13!”).
They've been charged with three counts; Conspiracy to violate the Export Control Reform Act, Conspiracy to smuggle goods from the United States, and Conspiracy to defraud the United States (impairing Commerce Department licensing and enforcement).
The case places an unusual spotlight on Super Micro, a Silicon Valley company that has emerged as a key supplier of servers configured with Nvidia processors for data centers and cloud providers. The inclusion of a co-founder raises questions about whether the alleged activity reflects isolated conduct or broader compliance gaps, though prosecutors haven’t accused the company itself of wrongdoing.
Shares of Super Micro fell sharply in extended trading following reports of the charges, reflecting investor concern that the case could disrupt relationships with customers and suppliers or invite additional scrutiny from regulators.
A Persistent Weak Point
U.S. officials have spent the past several years tightening export controls on advanced semiconductors, aiming to limit China’s ability to develop cutting-edge AI systems with potential military applications. Yet enforcement has lagged behind policy.
Investigations and industry disclosures have repeatedly shown that restricted chips continue to reach Chinese buyers through a web of resellers and transshipment hubs in Asia. The result is a gray market that has proven difficult to eliminate, even as Washington expands blacklists and licensing requirements.
The latest case suggests a shift in strategy. Rather than focusing primarily on overseas networks, prosecutors appear increasingly willing to pursue individuals closer to the source of supply - where access, knowledge and documentation can be harder to disentangle.
"The conduct by these individuals alleged in the indictment is a contravention of the Company’s policies and compliance controls, including efforts to circumvent applicable export control laws and regulations," Supermicro said in a statement. "Supermicro maintains a robust compliance program and is committed to full adherence to all applicable U.S. export and re-export control laws and regulations."
This isn't the first time Super Micro has made news for shady practices. Back in 2020, the company (and its then-CFO) were slapped with a $17.5 million SEC settlement for years of classic accounting gimmicks - prematurely booking revenue on servers that were still sitting in warehouses, shipping incomplete units, and all the usual channel-stuffing tricks that inflated profits by hundreds of millions. Fast-forward to 2024, and short-seller Hindenburg dropped a bomb accusing Supermicro of ongoing related-party deals tied to the CEO’s family in Taiwan/China, more revenue-recognition games, and enough red flags that Ernst & Young quit as auditor and the DOJ opened a criminal probe.
High Stakes for the AI Supply Chain
The chips at the center of the case are among the most sought-after components in the global technology industry. Nvidia’s high-performance processors underpin everything from generative-AI models to advanced analytics systems, and demand has surged as companies race to build out AI infrastructure.
That demand has also created incentives to circumvent restrictions. Industry executives have privately acknowledged that once chips leave the U.S. or authorized distributors, tracking their final destination becomes challenging.
Related:
2 Chinese Nationals, 2 Americans Charged With Smuggling Nvidia Chips To China
For Super Micro, the episode comes at a pivotal moment. The company has benefited from a boom in AI-related spending, positioning itself as a fast-growing provider of specialized server systems. Any perception of compliance failures could complicate that trajectory, particularly if customers or partners reassess risk.