The U.S. Department of Justice has uncovered a large-scale smuggling operation illegally exporting advanced Nvidia chips to restricted markets, including China. Investigators revealed that between October 2024 and May 2025, AI GPUs worth over $160 million were shipped using fake documents and cover stories.
🔹 The bust comes amid stricter U.S. export controls on AI-related technology
🔹 Key targets were Nvidia’s H100 and H200 GPUs
🔹 One suspect has already pleaded guilty, others face up to 20 years in prison
Operation Gatekeeper: Smuggling Disguised with Fake Documents
The main suspect, Alan Hao Hsu of Texas, and his company Hao Global LLC, admitted to smuggling and illegal exports. According to prosecutors, Hsu manipulated shipping documents, mislabeled GPU shipments, and concealed the true destinations—mainly China and Hong Kong. Investigators also traced over $50 million in Chinese-linked funds used to finance the purchases.
Sentencing is scheduled for February 18, 2026. Hsu faces up to 10 years in prison, while his company could be fined double its illegal profits.
Parallel Smuggling Routes: Gong and Yuan
Authorities also charged Fanyue Gong, a Chinese national living in New York, and Benlin Yuan, a Canadian executive based in Ontario, with running separate but connected smuggling networks. Gong allegedly used fake buyers and intermediaries to acquire GPUs, falsely claiming they were bound for U.S. users or approved third countries.
The GPUs were later repackaged and re-exported to China and Hong Kong as generic components. Yuan allegedly recruited inspectors, instructed them to hide Chinese destinations, created cover stories to recover seized cargo, and misled U.S. authorities.
Yuan faces up to 20 years in prison for conspiring to violate the Export Control Reform Act, while Gong could receive up to 10 years for smuggling conspiracy.
Nvidia and U.S. Officials Respond
A Nvidia spokesperson emphasized the company's strict compliance even on resale markets:
“Even sales of older-generation GPUs on secondary markets are subject to thorough review.”
The case unfolds amid ongoing efforts to prevent China from accessing cutting-edge AI computing. President Donald Trump recently announced that Nvidia’s H200 chips may be sold to approved buyers in China, but only if the U.S. government receives a 25% profit share.
China Ramps Up Alternatives Amid Tech Blockade
With tighter U.S. restrictions in place, Chinese companies like Huawei, Alibaba, and Baidu are accelerating development of domestic chip solutions. Huawei, for example, is expanding its Ascend AI chip line and building massive computing clusters to replace Nvidia tech.
Nvidia CEO Jensen Huang warned that if the company is fully cut off from China, Huawei would fill the void and supply the market with AI hardware.
As chip smuggling risks grow, the U.S. may further tighten enforcement, with global ripple effects likely to impact not only the U.S. and China, but also European firms involved in AI infrastructure.
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