U.S. Attorney Nicholas Ganjei said the defendants ran a ‘sophisticated’ network in smuggling cutting-edge AI technology to China.
Federal prosecutors have shut down a Chinese smuggling network that allegedly attempted to ship advanced Nvidia chips to China, in violation of U.S. export control laws, the Department of Justice (DOJ) announced on Dec. 8.
Gong Fanyue, 43, a Chinese citizen and New York-based tech company owner, was arrested in New York on Dec. 3.
Yuan Benlin, 58, a Canadian citizen from China and the chief executive of a Virginia-based information technology (IT) service company, was arrested in Virginia on Nov 28.
Gong and Yuan were accused of independently conspiring with employees of a Hong Kong-based logistics company and a China-based artificial intelligence (AI) technology company to circumvent U.S. export controls, according to the prosecutors, who estimated that the scheme started in at least November 2023.
“The United States has long emphasized the importance of innovation and is responsible for an incredible amount of cutting-edge technology, such as the advanced computer chips that make modern AI possible,” Assistant Attorney General for National Security John A. Eisenberg said in a statement.
“The National Security Division, along with our partners, will vigorously enforce our export-control laws and protect this edge.”
Scheme
According to a criminal complaint, Gong and his coconspirators obtained Nvidia graphics processing units (GPUs) through straw purchasers and intermediaries, and falsely claimed that the chips were destined for U.S. customers or countries that didn’t require an export licence, such as Taiwan and Thailand.
The GPUs were sent to several U.S. warehouses, where individuals hired by Gong—referred to as “engineers”—removed the original Nvidia labels from the chips and replaced them with new labels for a fake company called “SANDKYAN,” according to the criminal complaint.
The shipping and export papers for the GPUs were allegedly misclassified as generic computer parts, such as adapters, adapter modules, or contactor controllers, according to the criminal complaint.
Gong is charged with conspiracy to smuggle goods from the United States and faces a maximum prison sentence of 10 years, according to the DOJ.
By Frank Fang
