In brief
- Two Chinese nationals are accused of skirting export controls by sending high-end GPUs to China.
- Prosecutors say the defendants routed shipments through Asia to hide their true destination.
- The men face 20 years in federal prison if convicted.
Two California men are facing federal charges for allegedly funneling high-performance AI chips to China in violation of U.S. export laws designed to protect sensitive technology, the U.S. Department of Justice said on Tuesday.
Chuan Geng of Pasadena and Shiwei Yang of El Monte were charged Monday in Los Angeles with conspiring to violate the Export Control Reform Act.
Prosecutors allege the pair used their company, ALX Solutions Inc., to illegally ship restricted graphics processing units—known as GPUs—to China through third-party shippers in Southeast Asia, masking the final destination.
Federal agents took both men into custody on Saturday. Geng, a permanent U.S. resident, surrendered to federal agents.
Yang, whom prosecutors say overstayed his visa and is in the country illegally, was arrested the same day. The charge carries a maximum penalty of 20 years in prison.
According to the complaint, ALX Solutions, which operated out of El Monte, CA., was formed shortly after the U.S. Commerce Department began requiring licenses for certain advanced microchips headed to China.
In January, ahead of the second Trump inauguration, the Biden Administration tightened restrictions on the export of artificial intelligence chips and related technologies.
“To enhance U.S. national security and economic strength, it is essential that we do not offshore this critical technology and that the world’s AI runs on American rails,” the White House said at the time.
From October 2022 through July of this year, the DOJ said the company allegedly sent more than 20 shipments to Southeast Asia that eventually made their way to China.
“A review of export records, business records, and company websites indicates that a December 2024 shipment and at least 20 previous shipments by ALX Solutions involved exports from the U.S. to shipping and freight-forwarding companies in Singapore and Malaysia, which commonly are used as transshipment points to conceal illegal shipments to China,” the DOJ wrote.
Following a court appearance on Monday, Geng was released on a $250,000 bond. Yang, however, remains in custody pending a detention hearing. Both men are scheduled to be arraigned Sept. 11 in federal court.
Prosecutors say ALX never received payments from the listed recipients of the shipments. Instead, funds came from firms in Hong Kong and mainland China, including a $1 million wire transfer from a China-based company in early 2024.
The Department of Justice did not immediately respond to Decrypt’s request for comment.
Due to their ability to process large amounts of data, GPUs are essential to artificial intelligence development. The U.S. has increasingly restricted GPU exports to China, citing national security concerns. Other countries restricted from GPU exports include Russia, Iran, and North Korea.
In April, amid rising tariffs and tensions between the U.S. and China, chipmaker Nvidia said it is investing $500 billion in infrastructure development and moving parts of its AI supercomputer manufacturing operations to the United States.