Three Super Micro employees have been charged with conspiring to unlawfully divert cutting-edge U.S. artificial intelligence technology to China. An indictment unsealed on Thursday says Yih-Shyan “Wally” Liaw, Ruei-Tsang “Steven” Chang, and Ting-Wei “Willy” Sun were involved in a smuggling plot that leveraged a middleman Southeast Asian company to fake paperwork and repackage servers that were powered by cutting-edge Nvidia chips. The underhanded operation is thought to have netted roughly $2.5b in sales since 2024.

Super Micro isn’t named in the indictment, but Liaw is a co-founder of the server firm, with nearly half a billion dollars worth of shares under his belt (the shares just dropped 12% in value on this news). Moreover, Chang is a sales manager for Super Micro in Taiwan. Sun is referred to as a third-party broker and fixer who has worked with the other two at Super Micro previously. Liaw (71, a U.S. citizen), and Sun (44, Taiwan) have been arrested, but Chang (53, Taiwan) is currently a fugitive, notes the Justice Department PR.

The transshipment scheme exposed

Basically, billions of dollars of Nvidia-powered servers that shouldn’t have been available to Chinese customers were funneled to the country using a fake front company, which fabricated paperwork and assembled thousands of dummy servers, to fool inspectors. It was far from a casual or opportunistic operation, with a high level of coordinated deception.

Despite the sophistication of the covert documentation, logistics, and supporting operations, some analysts have highlighted the brazen absurdity of the operation. For example, the indicted trio have been accused of maintaining a substantial inventory of thousands of dummy (empty shell) servers in Southeast Asia, supposedly awaiting deployment to local (not China-based) customers.

Analyst Max Weinbach highlights some CCTV image captures showing workers using hair dryers to transfer serial number stickers from genuine servers to the dummy server shells. They would subsequently ship the real GPU-packed servers to China.

Today, due to the ever-shifting sands of U.S. export controls policy, some of the smuggled Super Micro servers might be approved as exportable after following a framework to get a license.

Super Micro and Nvidia aren’t in the FBI’s crosshairs

Super Micro has acknowledged that the accused trio are “associated” with it, but highlights that the company isn’t named as a defendant in the indictment. The official statement says that it has “placed the two employees on administrative leave and terminated its relationship with the contractor, effective immediately.”

At the same time, the server maker distanced itself from the actions of the trio. The smuggling caper was described as “a contravention of the Company's policies,” and Super Micro “maintains a robust compliance program and is committed to full adherence to all applicable U.S. export and re-export control laws and regulations.”

Nvidia sent a similar themed statement to Tom’s Hardware. “Strict compliance is a top priority for Nvidia. We continue to work closely with our customers and the government on compliance programs as export regulations have expanded,” wrote the AI and graphics chip maker. “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.”

Liaw, Chang, and Sun face some very serious federal felony charges. It is early days in the investigation, but it is possible that these people, in trying to enrich themselves, will end up serving decades (up to 30 years) behind bars, and/or fines, asset forfeiture, and also bans from employment in export-controlled industries.

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Mark Tyson is a news editor at Tom's Hardware. He enjoys covering the full breadth of PC tech; from business and semiconductor design to products approaching the edge of reason.