U.S. Smashes China-Linked AI Smuggling Ring, Seizes $50m Nvidia Chips

By Kazeem Ugbodaga

U.S. authorities have dismantled a major technology-smuggling ring accused of funnelling high-end artificial intelligence hardware to China and other restricted destinations, seizing more than $50 million in advanced Nvidia processors as part of an operation officials say posed a significant threat to national security.

The investigation, codenamed Operation Gatekeeper, resulted in the arrest of two businessmen and guilty pleas from a Texas company and its owner, who admitted to exporting sensitive AI technology in violation of federal controls.

Prosecutors say the network illegally moved at least $160 million worth of Nvidia’s H100 and H200 Tensor Core GPUs—chips central to cutting-edge AI models and military-grade computing.

Assistant Attorney General for National Security John A. Eisenberg described the case as a stark reminder of the stakes involved in protecting America’s technological edge.

“These advanced computer chips are the result of decades of innovation. We will vigorously enforce export-control laws to safeguard them,” he said.

Court documents show that Alan Hao Hsu, 43, of Missouri City, Texas, and his company, Hao Global LLC, pleaded guilty in October to smuggling offences.

Prosecutors said Hsu and others falsified shipping papers, misclassified cargo and concealed end-users to ship GPUs to China, Hong Kong and other controlled destinations. The company received more than $50 million in wire transfers from China to finance the scheme.

Hsu faces up to 10 years in prison at sentencing in February, while his company could receive fines totalling twice the proceeds of the offence.

In separate arrests, U.S. agents took into custody two Chinese nationals allegedly linked to the operation.

Benlin Yuan, 58, CEO of a Virginia IT services firm tied to a major Beijing-based parent company, was arrested on 28 November for conspiring to violate the Export Control Reform Act.

Fanyue “Tom” Gong, 43, owner of a New York technology company, was arrested on 3 December for conspiring to smuggle controlled goods.

Prosecutors allege Yuan and Gong worked with employees of a Hong Kong logistics firm and a China-based AI company to disguise the movement of restricted chips.

According to the complaints, straw purchasers obtained Nvidia GPUs inside the U.S., where workers removed original labels and replaced them with the name SANDKYAN, a fictitious entity. The goods were then repackaged as “generic computer parts” before being routed overseas.

The government says Yuan helped coordinate inspections of the relabelled hardware and advised associates to conceal its ultimate destination.

He also allegedly discussed crafting false explanations to persuade federal authorities to release detained shipments.

If convicted, Yuan faces up to 20 years in prison and fines of up to $1 million. Gong faces up to 10 years for export-smuggling conspiracy. Both remain in custody.

The FBI said the case underscores intensifying efforts by foreign actors to acquire advanced U.S. AI technology.

Roman Rozhavsky, Assistant Director of the FBI’s Counterintelligence Division, warned private companies to remain vigilant.

“Adversaries are trying to match U.S. breakthroughs in artificial intelligence. We will aggressively pursue those who try to move this technology illegally,” he said.

Prosecutors emphasised that the chips involved are foundational to both civilian and military AI development, including generative AI, scientific computing and next-generation weapons systems.

The investigation was led by the Commerce Department’s Bureau of Industry and Security, Homeland Security Investigations and the FBI’s New York and Washington field offices.

Federal prosecutors from Texas and the Justice Department’s National Security Division are handling the case.

Authorities say Operation Gatekeeper remains ongoing, with additional targets under scrutiny as the U.S. intensifies its crackdown on illicit technology pipelines to China.