WASHINGTON, Dec 8 (Reuters) - Two Chinese men are in custody for allegedly smuggling Nvidia H100 and H200 chips to China, the U.S. Justice Department said on Monday, as President Donald Trump gave the green light for Nvidia to export its H200 chips to Beijing.
Prosecutors allege that Fanyue Gong, 43, a Chinese citizen living in New York, and Benlin Yuan, 58, a Canadian citizen from China, independently conspired with employees of a Hong Kong-based logistics company and a China-based AI technology company to circumvent U.S. export controls, according to the Justice Department.
In court documents, prosecutors said that Gong and his co-conspirators obtained the Nvidia chips through straw purchasers and intermediaries, and falsely claimed that the goods were for U.S. customers or customers in third countries like Taiwan and Thailand.
The chips were shipped to multiple U.S. warehouses, where individuals removed the Nvidia labels and affixed labels bearing the name of what prosecutors believe was a fake company, according to the criminal complaint. The chips were then prepared for export, according to the complaint.
In a separate complaint, prosecutors said Yuan helped recruit and organize individuals to inspect the mislabeled chips on behalf of the Hong Kong logistics company.
Yuan allegedly agreed to direct inspectors not to say the goods were destined for China, prosecutors said, adding that he also directed discussions regarding crafting ;a story his company could use to get chips and other equipment released after federal law authorities detained it.
Prosecutors estimate that the scheme operated since at least November 2023, according to court documents.
Another man, Alan Hao Hsu, 43, and his company pleaded guilty in October to smuggling and unlawful export activities as part of the scheme, according to the Justice Department.
Hsu and his company received more than $50 million in wire transfers from China to help fund the operations, which exported and attempted to export at least $160 million worth of export-controlled Nvidia chips, the department said.
"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," Nicholas J. Ganjei, the U.S. attorney for the Southern District of Texas, said in a statement.
"While millions of controlled GPUs 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 Nvidia spokesperson said, calling the sale of older generation products on the secondary market "subject to strict security and review."
The Chinese Embassy in Washington and a lawyer for Yuan could not be reached for comment.
In 2022, the U.S. government implemented export controls cutting China off from ;certain semiconductor chips made anywhere in the world with U.S. equipment. The Trump administration in September expanded its restricted export list to automatically include subsidiaries owned 50% or more by a company on the list.
(Reporting by Jasper Ward)
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