Federal prosecutors say three men, including a co-founder of Supermicro, smuggled restricted Nvidia AI servers to China, America’s top strategic rival, evading U.S. export controls. The indictment says more than $510 million in advanced AI hardware was funneled through a Southeast Asian shell company to hide its true destination.
Reports identified the defendants as Supermicro co-founder Wally Liaw, who now serves as a senior vice president and board member, Taiwan-based sales manager Steven Chang, and third-party broker Willy Sun, whom the indictment describes as a “fixer.”
Prosecutors say the operation ran through that shell company, which placed orders, took delivery, and passed the servers along, concealing the link between the U.S. manufacturer and the China-based buyers.
“The defendants and their co-conspirators used a particular company ("Company-1") based in Southeast Asia as a pass-through entity to give the U.S. Manufacturer’s transactions that they arranged the appearance of legitimate commercial activity and to obscure their China-based end customers.”
The indictment describes a system in which restricted U.S. AI technology moved through a U.S. company’s pipeline and into China anyway, despite rules designed to prevent exactly that. The servers were built for artificial intelligence workloads and powered by advanced Nvidia chips that require a license to export to China, the kind of hardware U.S. export controls are meant to keep out of China’s hands.
Prosecutors say the scheme did not stop with the shipments. Once compliance reviews began to catch up, the indictment says the defendants tried to make it appear the servers were still where they were supposed to be, even after they had already been moved.
“For example, to deceive the U.S. Manufacturer’s compliance team, which was responsible for conducting audits of Company-1’s purchases of servers to ensure adherence to U.S. export control laws, the defendants staged ‘dummy’ servers, non-working, physical replicas of the U.S. Manufacturer’s servers, for inspection at the locations where Company-1 was purportedly storing the servers it had purchased from the U.S. Manufacturer. However, the actual servers from the U.S. Manufacturer had already been unlawfully shipped to China.”
According to the indictment, the real servers were already in China while replicas were staged for inspection, with labels moved, boxes repackaged, and documentation prepared to reinforce the claim that the intermediary was the legitimate end user. Prosecutors say the goal was simple: keep the shipments moving and the destination hidden.
Prosecutors say one defendant pushed to accelerate shipments before tighter export rules took effect, while another message urged colleagues to “speed these up before May 13!” after sharing a White House announcement on new restrictions.
“We will speed up the shipment right away! Please issue the B200 [purchase order] right away!”
The indictment lays out a chain: orders routed through an intermediary, shipments under that cover, inspections met with staged hardware, and deliveries pushed through before tighter rules took effect. Each step moved restricted technology farther from oversight and closer to China.
The hardware at issue powers artificial intelligence systems used in military planning, surveillance, and advanced computing, the exact systems U.S. export controls are meant to keep out of China’s hands. Prosecutors say it reached China anyway.
Read More: Taiwan Update: Historic Trade Deal Strengthens Ties, Offers Security Benefits, but Faces a Hurdle
Selling AI Computer Chips to China: What Could Possibly Go Wrong?
Supermicro itself was not charged, but the conduct described in the indictment ran through its sales pipeline and compliance systems. The company said the conduct violated its policies and that it is cooperating with investigators, while the two employees were placed on administrative leave and a contractor was terminated.
Investors reacted immediately. Supermicro closed at $30.79, then dropped to $23.62 in premarket trading at the time of publication, a fall of more than 23 percent, as investors reacted to the legal risk and tightening scrutiny around AI exports.
The controls are in place. The question now is whether they are being enforced before the damage is already done.
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