U.S. uncovers scheme to reroute Nvidia GPUs worth $160 million to China despite export bans

U.S. authorities announced Tuesday that they person unopen down yet different China-linked smuggling web that trafficked oregon attempted to postulation much than $160 cardinal successful export-controlled Nvidia AI chips.

According to a press release from the U.S. Attorney's Office, 2 businessmen were taken into custody, portion a Houston-based institution and its proprietor person already pleaded blameworthy to spot smuggling arsenic portion of the wider investigation.

The lawsuit comes arsenic Washington steps up its enforcement of export controls aimed astatine curbing China's entree to precocious AI technologies, including Nvidia's Graphics Processing Units. 

The operation, dubbed "Operation Gatekeeper," exposed efforts to funnel cutting-edge AI chips — with subject and civilian applications — to entities that could undermine U.S. nationalist security, according to a connection from U.S. Attorney Nicholas J. Ganjei for the Southern District of Texas.

Newly unsealed documents amusement that Alan Hao Hsu, 43, of Missouri City, Texas, and his company, Hao Global LLC, pleaded blameworthy to smuggling and unlawful export activities connected Oct. 10. 

Officials said Hsu and associates had exported oregon attempted to export astatine slightest $160 cardinal worthy of Nvidia H100 and H200 GPUs betwixt October 2024 and May 2025.

The H200 and H100 models, portion not Nvidia's astir precocious chips, inactive require a peculiar licence to beryllium shipped to China nether existent controls.

Hsu's cognition allegedly falsified shipping documents to misclassify the GPUs and fell their existent destinations, including China, Hong Kong and different prohibited locations. Investigators traced much than $50 cardinal successful funds originating from China to assistance money the strategy by Hsu and Hao Global.

Hsu, who remains escaped connected bond, faces up to 10 years successful situation astatine his Feb. 18 sentencing, portion Hao Global could beryllium deed with fines up to doubly its illicit gains positive probation. 

In a connection shared with CNBC, an Nvidia spokesperson said that export controls stay rigorous and that "even income of older procreation products connected the secondary marketplace are taxable to strict scrutiny and review."

"While millions of controlled GPUs are successful work astatine businesses, homes, and schools, we volition proceed to enactment with the authorities and our customers to guarantee that second-hand smuggling does not occur," the spokesperson said.

U.S. officials besides charged Fanyue Gong, 43, a Chinese national residing successful New York, and Benlin Yuan, 58, a Canadian national surviving successful Ontario, arsenic portion of their investigation.

Yuan serves arsenic CEO of a U.S. subsidiary of a Beijing-headquartered Chinese IT company, portion Gong owns a New York exertion firm. Both allegedly conspired independently with a Hong Kong logistics institution and a China-based AI firm to evade spot controls.

Prosecutors alleged Gong utilized straw purchasers and intermediaries to get GPUs by misrepresenting the extremity customers arsenic being successful the U.S. oregon successful unrestricted 3rd countries.

Workers astatine U.S. warehouses would past rebrand shipments nether fictitious names and mislabel them arsenic generic parts for export to China and Hong Kong, according to the case.

Meanwhile, Yuan is accused of recruiting inspectors for the Hong Kong firm, instructing them to conceal Chinese destinations, devising screen stories to merchandise detained shipments, and providing mendacious accusation to authorities. He besides allegedly handled retention for further GPU exports.

If convicted, Yuan could look up to 20 years for conspiracy to interruption the Export Control Reform Act, portion Gong could person arsenic overmuch arsenic 10 years for conspiracy to smuggle.

The probe progressive the Commerce Department's Bureau of Industry and Security, which oversees and enforces U.S. export controls, including those connected Nvidia. The lawsuit comes amid a flurry of akin busts regarding unauthorized Nvidia exports successful caller months. 

Lawmakers person been attempting to tighten oversight of U.S. spot controls pursuing reports of loopholes successful existing rules.

However, the U.S. President signaled this week that helium would let Nvidia to ship its H200 chips to "approved customers" successful China and elsewhere, connected the information that Washington gets a 25% chopped connected the profits.

Although the H200 isn't state-of-the-art successful Nvidia's lineup, it would go the astir precocious exemplary disposable to China and could assistance satiate request for AI compute powerfulness successful the country.