US Justice Department accuses two Chinese men of trying to smuggle Nvidia chips

[WASHINGTON] Two Chinese men are in custody for allegedly smuggling Nvidia H100 and H200 chips to China, the US Justice Department said on Monday (Dec 8), as US President Donald Trump gave the green light for Nvidia to export its H200 chips to Beijing.

Prosecutors allege that Fanyue Gong, 43, a Chinese citizen living in New York, and Benlin Yuan, 58, a Canadian citizen from China, independently conspired with employees of a Hong Kong-based logistics company and a China-based AI technology company to circumvent US export controls, according to the Justice Department.

In court documents, prosecutors said that Gong and his co-conspirators obtained the Nvidia chips through straw purchasers and intermediaries, and falsely claimed that the goods were for US customers or customers in third countries such as Taiwan and Thailand.

The chips were shipped to multiple US warehouses, where individuals removed the Nvidia labels and affixed labels bearing the name of what prosecutors believe was a fake company, according to the criminal complaint. The chips were then prepared for export, according to the complaint.

In a separate complaint, prosecutors said Yuan helped recruit and organise individuals to inspect the mislabelled chips on behalf of the Hong Kong logistics company. Yuan allegedly agreed to direct inspectors not to say the goods were destined for China, prosecutors said, adding that he also directed discussions to craft a story his company could use to get chips and other equipment released after they were seized by federal authorities. Prosecutors estimate that the scheme had been in operation since at least November 2023, according to court documents.

Yuan’s lawyer declined to comment, while a representative for Gong could not immediately be identified.

A spokesperson for the Chinese Embassy in Washington said that “the Chinese government requires Chinese citizens abroad to strictly abide by local laws and regulations, while also legally protecting the legitimate rights and interests of Chinese citizens overseas”.

Another man, Alan Hao Hsu, 43, and his company pleaded guilty in October to smuggling and unlawful export activities as part of the scheme, according to the Justice Department.

Hsu and his company received more than US$50 million in wire transfers from China to help fund the operations, which exported and attempted to export at least US$160 million worth of export-controlled Nvidia chips, the department said.

“Operation Gatekeeper has exposed a sophisticated smuggling network that threatens our Nation’s security by funnelling cutting-edge AI technology to those who would use it against American interests,” Nicholas J. Ganjei, the US attorney for the Southern District of Texas, said.

“While millions of controlled GPUs are in service at businesses, homes, and schools, we will continue to work with the government and our customers to ensure that second-hand smuggling does not occur,” a Nvidia spokesperson said, calling the sale of older generation products on the secondary market “subject to strict security and review”.

In 2022, the US government implemented export controls, cutting China off from certain semiconductor chips made anywhere in the world with US equipment. The Trump administration in September expanded its restricted export list to automatically include subsidiaries owned 50 per cent or more by a company on the list. REUTERS