A federal indictment unsealed in New York has revealed a sophisticated, multi-year scheme to smuggle advanced Nvidia artificial intelligence (AI) server technology into China, bypassing strict U.S. export controls. The case centers on three individuals tied to Super Micro Computer (Supermicro), including co-founder Wally Liaw, who are accused of orchestrating a backdoor channel that moved at least $2.5 billion worth of restricted hardware to Chinese customers between 2024 and 2025.
The indictment alleges that servers built with advanced Nvidia chips, which cannot legally be exported to China without a U.S. government license, were disguised to hide their true destination. Prosecutors claim the scheme began with Supermicro servers assembled in the United States, which were then routed through the company's facilities in Taiwan. After moving through multiple South Asian nations, the servers were repackaged and quietly sent onward to China.
A key element of the alleged operation was the use of an unnamed Southeast Asian company as a middleman. On paper, this company appeared to be the final buyer, but investigators say it served as a pass-through for the real customers in China. This structure was crucial because U.S. export rules heavily depend on identifying the true end-user and final destination of the technology.
Prosecutors detail an elaborate cover-up that went beyond falsified paperwork. According to the Justice Department, the group staged thousands of non-working "dummy" servers for inspections while the real, restricted machines had already been shipped to China. They also allegedly duplicated Nvidia chip serial numbers to help the equipment pass compliance checks. Together, these tactics created an illusion of compliance while moving critical AI systems through a back door.
The scale of the scheme is significant. Prosecutors say it generated approximately $510 million in sales during just a three-week period in 2025. The three defendants named are Yih-Shyan "Wally" Liaw (Supermicro co-founder), Ruei-Tsang "Steven" Chang, and contractor Ting-Wei "Willy" Sun. U.S. authorities report that Liaw and Sun have been arrested, while Chang remains at large.
In response to the indictment, Supermicro stated that the three individuals were associated with the company, that two employees had been placed on administrative leave, and that its relationship with the contractor had been terminated. This case highlights the intense pressure on Nvidia, caught between margin pressures and escalating U.S.-China tech war curbs. China's share of Nvidia's revenue dropped from about 13% ($17 billion) in FY2025 to roughly 5% under tighter export controls.
