Nvidia H100 chips in a server room at Yotta Data Services Pvt. data center, in Navi Mumbai, India, on Thursday, March 14, 2024.
dhiraj singh | Bloomberg | Getty Images
U.S. authorities announced Tuesday they had shut down another China-linked smuggling ring that was trafficking or attempting to traffic more than $160 million in export-controlled goods. Nvidia AI chips.
According to a news release from the U.S. Attorney’s Office, two businessmen have been arrested, while a Houston-based company and its owner have already pleaded guilty to chip smuggling as part of a broader investigation.
The case comes as Washington steps up enforcement of export controls aimed at restricting China’s access to advanced AI technologies, including Nvidia’s graphics processing units.
The operation, dubbed “Operation Gatekeeper,” exposed efforts to funnel cutting-edge AI chips — with military and civilian applications — to entities that could harm U.S. national security, according to a statement from U.S. Attorney Nicholas J. Ganjei for the Southern District of Texas.
Newly released documents show that Alan Hao Hsu, 43, of Missouri City, Texas, and his company, Hao Global LLC, pleaded guilty to smuggling and illegal export activities on October 10.
Officials said Hsu and his associates exported or attempted to export at least $160 million worth of Nvidia H100 and H200 GPUs between October 2024 and May 2025.
The H200 and H100 models, while not Nvidia’s most advanced chips, still require a special license to ship to China under current controls.
Hsu’s operation allegedly falsified shipping documents to misclassify GPUs and hide their true destinations, including China, Hong Kong and other prohibited locations. Investigators traced more than $50 million in funds from China to help finance Hsu and Hao Global’s project.
Hsu, who remains free on bail, faces up to 10 years in prison when he is sentenced on February 18, while Hao Global could face fines of up to twice his illicit earnings plus probation.
In a statement shared with CNBC, an Nvidia spokesperson said export controls remain stringent and “even aftermarket sales of older generation products are subject to careful and rigorous review.”
“As millions of controlled GPUs are in use in businesses, homes and schools, we will continue to work with the government and our customers to ensure there is no second-hand contraband,” the spokesperson said.
Rebranded Nvidia GPUs
US authorities also charged Fanyue Gong, 43, a Chinese citizen living in New York, and Benlin Yuan, 58, a Canadian citizen living in Ontario, as part of their investigation.
Yuan is CEO of a U.S. subsidiary of a Chinese IT company headquartered in Beijing, while Gong owns a New York technology company. Both allegedly conspired independently with a Hong Kong logistics company and a China-based AI company to evade controls on the chips.
Prosecutors alleged that Gong used straw buyers and middlemen to acquire GPUs by misrepresenting end customers as being in the United States or unrestricted third countries.
U.S. warehouse workers would then rebrand the shipments under fictitious names and falsely label them as generic parts intended for export to China and Hong Kong, as appropriate.
Meanwhile, Yuan is accused of recruiting inspectors for the Hong Kong company, asking them to conceal Chinese destinations, inventing cover stories to release detained shipments and providing false information to authorities. It would also have managed storage for additional GPU exports.
If convicted, Yuan could be sentenced to up to 20 years for conspiracy to violate the Export Control Reform Act, while Gong could be sentenced to up to 10 years for conspiracy to smuggle.
The investigation involved the Commerce Department’s Bureau of Industry and Security, which oversees and enforces U.S. export controls, including those of Nvidia. The case comes amid a wave of similar bankruptcies over Nvidia’s unauthorized exports in recent months.
Lawmakers have attempted to tighten oversight of U.S. controls on microchips following reports of gaps in existing rules.
However, the US president announced this week that he would allow Nvidia to ship its H200 chips to “approved customers” in China and elsewhere, provided Washington gets a 25% cut of profits.
Although the H200 is not at the forefront of Nvidia’s lineup, it would become the most advanced model available in China and could help satisfy the country’s demand for AI computing power.
