US authorities catch 'trafficking network' smuggling $160M of NVIDIA AI chips to China

US authorities have busted an AI chip trafficking network that was attempting to send $160 million worth of NVIDIA H100 and H200 AI GPUs to China, as the smugglers were changing the shipments' final destination.

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In a press release issued by the U.S. Department of Justice, authorities reported a trafficking network in Houston, Texas, that has been convicted of smuggling NVIDIA AI chips to China using a "complex scheme". Court documents reveal two individuals -- Alan Hao Hsu, and those who worked for his company, Hao Global LLC -- attempted to export NVIDIA H100 and H200 AI GPUs worth $160 million by manipulating official paperwork and hiding the "ultimate destination of the GPUs".

The network itself was busted by the discovery of a wire transfer that began in the People's Republic of China (PRC), with the NVIDIA AI GPUs shipped to US warehouses and then rebranded as "SANDKYAN", allowing the group to misclassify the AI GPUs and then export them.

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Assistant Attorney General for National Security John A. Eisenberg, said: "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. This advantage isn't free but rather the result of our engineers' and scientists' hard work and sacrifice. The National Security Division, along with our partners, will vigorously enforce our export-control laws and protect this edge".

Assistant Director Roman Rozhavsky of the FBI's Counterintelligence Division, said: "Gong and his accomplices allegedly led a complex scheme to smuggle high-performance graphic processing units to China in violation of U.S. export laws. This case highlights the importance of interagency cooperation to protect U.S. technology; the FBI, alongside our partners, will continue to aggressively investigate these violations and bring those responsible to justice. We ask our private sector partners to remain vigilant to this increasing threat as our adversaries try to match U.S. artificial intelligence breakthroughs".

U.S. Attorney Nicholas J. Ganjei for the Southern District of Texas, added: "Operation Gatekeeper has exposed a sophisticated smuggling network that threatens our Nation's security by funneling cutting-edge AI technology to those who would use it against American interests. These chips are the building blocks of AI superiority and are integral to modern military applications. The country that controls these chips will control AI technology; the country that controls AI technology will control the future. The Southern District of Texas will aggressively prosecute anyone who attempts to compromise America's technological edge".