Secret Nvidia Chip Smuggling Ring Busted -- $1M Payment Traced to China Sparks U.S. Crackdown

Two Chinese nationals have been arrested on charges of smuggling Nvidia's NVDA most powerful AI chips to Chinadespite strict U.S. export controls designed to keep them out of Beijing's hands. According to the Justice Department, Chuan Geng and Shiwei Yang allegedly used a shell company in CaliforniaALX Solutions Inc.to send Nvidia H100 chips through Singapore and Malaysia, without obtaining the required export licenses. Records show they never received payments from their Southeast Asian partners, but instead collected large sumslike a $1 million transfer in January 2024from buyers in Hong Kong and mainland China.

The H100s, until recently Nvidia's flagship AI accelerators, require U.S. government approval before being sold to countries considered national security risks. Authorities claim the duo falsely labeled shipments as compliant, despite not having the green light from the Commerce Department. Nvidia, for its part, said it primarily works with trusted partners and that any diverted chips would lack service, updates, or support. Internal messages found on seized devices allegedly show the defendants discussing how to move restricted hardware through third countries, in what investigators believe was a deliberate attempt to circumvent U.S. controls.

The case lands at a time when Washington is tightening the screws on China's access to cutting-edge semiconductors. While some headline chip deals grab attention, this case shows the U.S. is just as focused on backdoor smuggling by smaller players. One of the accused is a permanent U.S. resident, while the other is reportedly out of visa status. A judge has released Geng on bond, and a detention hearing for Yang is scheduled for August 12. If convicted, they could face up to 20 years in prison.