An executive at Super Micro Computer was arrested Thursday for allegedly smuggling servers with advanced AI chips into China.
The U.S. Department of Justice unsealed an indictment revealing that three people associated with Super Micro were charged in a conspiracy involving “false documents, staged dummy servers to mislead inspectors, and convoluted transshipment schemes” to bypass U.S. export rules on AI tech.
Super Micro Co-Founder, Board Member, and Vice President of Business Development Yih-Shyan Liaw, was among those arrested. A Taiwanese-based contractor, Ting-Wei Sun, was also arrested. Ruei-Tsang Chang, a sales manager also based in Taiwan, was charged but remains a fugitive.
“As alleged in the Indictment, the defendants participated in a systematic scheme to divert massive quantities of servers housing U.S. artificial intelligence technology to customers in China,” said U.S. Attorney Jay Clayton for the Southern District of New York, in a press release. “They did so through a tangled web of lies, obfuscation, and concealment—all to drive sales and generate revenues in violation of U.S. law.”
The case comes as the U.S. and China remain locked in an AI arms race. The U.S. has imposed strict export controls on advanced AI chips over national security concerns, particularly their potential military use. Nvidia, the leading supplier of AI chips, has been barred from selling its most advanced hardware to China.
In December, the U.S. began allowing Nvidia to sell less powerful chips to China, but those sales require government licenses and approval. The government also takes a 25% cut of the revenue from those sales.
As recently as December, Nvidia called reports of these types of smuggling schemes “far-fetched.”
According to the indictment, orders of U.S.-made servers containing the chips were initially sent to a company in Southeast Asia, where they were repackaged and then forwarded to companies in China in unmarked boxes.
Prosecutors say dummy servers were also staged at the Southeast Asian company and at a warehouse to mislead Super Micro’s compliance team and U.S. inspectors.
Surveillance cameras even recorded how a hair dryer was used “to remove and affix labels and serial number stickers to the server boxes and to the dummy servers.”
At the direction of Liaw, Chang, and Sun, the Southeast Asian company allegedly purchased roughly $2.5 billion worth of servers between 2024 and 2025. Between late April and mid-May 2025, at least $510 million worth of those servers were sent to China.
The three individuals are charged with conspiring to violate the Export Controls Reform Act, conspiring to smuggle goods from the U.S., and conspiring to defraud the United States. Collectively, the charges carry a maximum potential sentence of up to 30 years in prison.
Super Micro told Gizmodo in an emailed statement that it has placed Liaw and Chang on administrative leave and has terminated its relationship with Sun.
“The Company has been cooperating fully with the government’s investigation and will continue to do so,” the company said, adding that it has not been named as a defendant in the indictment.
For its part, Nvidia told Gizmodo that strict compliance is a “top priority” for the company.
“We continue to work closely with our customers and the government on compliance programs as export regulations have expanded,” a Nvidia spokesperson said in an emailed statement. “Unlawful diversion of controlled U.S. computers to China is a losing proposition across the board—NVIDIA does not provide any service or support for such systems, and the enforcement mechanisms are rigorous and effective.”
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