U.S. Crackdown Captures Duo Behind Covert GPU Supply to China’s AI Industry

Alright, let’s dive in.

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So, there are these federal agents out in Los Angeles, right? And guess what? They’ve apparently busted this whole sneaky network that was whisking away millions of dollars’ worth of super-fancy graphics processors to China. Yeah, despite all those tight export controls that you’d think would stop this sort of thing. Turns out, the operation was allegedly run by a couple of young folks — think early twenties — holed up in a, let’s be honest, pretty unassuming strip-mall office in El Monte. Classic.

The court papers dropped on Tuesday paint a pretty wild picture. ALX Solutions Inc. just kinda popped up not long after the U.S. cranked up its chip-export rules at the end of 2022. And over the next year and a half or so, these guys managed to set up 21 overseas shipments. They often went through places like Singapore or Malaysia, sneakily declaring their goods as simple video cards you wouldn’t need a license for. It all went under the radar until, boom, a standard customs inspection revealed the real cargo: the hottest graphics accelerators on the market, tucked away in crates simply labeled “computer parts.” Like, really subtle, right?

Then there’s this whole money trail. A buyer in Hong Kong wired over a cool $1 million upfront. And on the side, smaller deposits dribbled in from mainland businesses with ties to defense work. It gets even juicier — investigators caught Signal chats where the co-founder Chuan Geng was telling partner Shiwei Yang, something like, “split the orders, don’t stick to one forwarder, change the labels if anyone questions.” Sounds straight out of a spy novel, doesn’t it?

But the kicker? There’s this Bureau of Industry and Security rule from October 2022 that threw a wrench in China’s plans to snag these high-powered chips unless exporters got a license. BIS pegs the limit at 600 gigabytes per second of interconnect bandwidth — which, apparently, is ripe for boosting military AI. The affidavit reads like some kinda thriller itself: mislabeled pallets snagged by Long Beach customs, serial numbers that connect back to Nvidia’s files, and agents tailing a delivery van from port to a rental warehouse at ALX. When the search warrant hit, they found empty trays for about a thousand premium GPUs – valued over $25 million – with shipping slips aimed at a new AI company in Shenzhen.

Geng, a legal U.S. resident, just gave himself up without a fuss. Yang (his visa expired in 2020, go figure) was caught at LAX with a one-way ticket to Taipei. Geng got out on a $250,000 bond, while Yang’s waiting for an August 12 hearing. They’re both facing serious charges under the Export Control Reform Act, which could mean up to 20 years behind bars. Yikes.

And it doesn’t stop there. The Justice Department’s Counterintelligence and Export Control Section is on the case, pairing up with the U.S. Attorney’s Office in L.A. The FBI said something like it’s “classic transshipment with a shiny new twist,” and BIS mentioned they’re chasing civil penalties, maybe a lifetime export ban.

Public documents say Geng used to be the finance chief for an e-commerce startup that fell apart because of unpaid taxes. Yang? He co-owned a parcel forwarding gig that helped overseas folks score snazzy sneakers. Neither of them has a tech background, which kind of backs up the prosecutors’ theory that ALX was just here to funnel banned chips into China’s hungry accelerator market.

There’s still a need for a grand jury to bring an indictment, and the defense is gearing up for their angle: they’re planning to argue the chips were just below the Commerce’s performance mark when bought. Expect loads of expert yammering about bandwidth limits and firmware updates. The trial, if it happens, could swing around by spring 2026, which might give us our first close look at how the U.S. is thinking about tackling silicon smuggling in this AI age.

What a tangled mess, huh?

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