DOJ charges 3 in scheme to illegally export AI tech to China

Dec. 9 (UPI) — A Texas-based businessman has pleaded guilty and two others have been charged in a scheme to smuggle artificial intelligence technology to China in violation of U.S. export laws, the Justice Department announced Tuesday.

The U.S. Attorney’s Office for the Southern District of Texas said the three men trafficked or attempted to traffic more than $160 million in Nvidia AI chips, which require special licensing from the U.S. government to be shipped.

“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,” U.S. Attorney Nicholas J. Ganjei said.

Alan Hao Hsu, aka Haochun Hsu, and his company, Hao Global LLC, pleaded guilty to smuggling and unlawful export activities on Oct. 10. Hsu is set to be sentenced Feb. 18 and faces up to 10 years in prison, while his company could be fined twice what it gained from the operation.

Justice Department officials said Hsu falsified shipping documents to hide where the chips were going.

Two other men, Fanyue Gong, aka Tom Gong, a Chinese citizen who lives in Brooklyn; and Benlin Yuan, a Canadian citizen who lives in Mississauga, Ontario, were also charged as part of the investigation. Gong owns a technology company in New York while Yuan is the CEO of the U.S. subsidiary of a Chinese IT services company.

Officials said Gong allegedly shipped the chips after removing their proper labels. Yuan, meanwhile, is accused of recruiting people to inspect the falsely labeled chips for a Hong Kong logistics company.

Law enforcement officials arrested Gong on Dec. 3 and Yuan on Nov. 28.

In a statement to CNBC, Nvidia said its exports “are subject to strict scrutiny and review.”

“While millions of controlled [graphics processing units] are in service at businesses, homes and schools, we will continue to work with the government and our customers to ensure that second-hand smuggling does not occur, a spokesperson for the company said.