Two businessmen have been arrested for allegedly attempting to smuggle Nvidia H100 and H200 chips to China, according to a statement from the U.S. Department of Justice (DOJ) released on Monday. This operation highlights concerns regarding the transfer of advanced artificial intelligence technology to foreign entities.
The arrests coincide with a controversial announcement by former President Donald Trump, who indicated that his administration plans to lift restrictions on the export of Nvidia’s H200 chips to China. Trump also mentioned that the U.S. government would secure a 25% cut from future sales. The DOJ emphasized that the alleged smuggling poses a significant risk to national security, with U.S. Attorney Nicholas Ganjei stating, “The country that controls these chips will control AI technology; the country that controls AI technology will control the future.”
Details of the Allegations
The detained individuals, Fanyue Gong, also known as Tom Gong, 43, and Benlin Yuan, 58, are accused of being part of a sophisticated smuggling network. Gong is a Chinese citizen residing in Brooklyn, New York, while Yuan holds Chinese citizenship and resides in Mississauga, Ontario, Canada. They were apprehended during the DOJ’s investigation, dubbed Operation Gatekeeper, which reportedly shut down a network that had funneled more than $50 million worth of advanced graphic processing units (GPUs) to China and other restricted areas.
According to the DOJ, Gong and Yuan were conspiring with employees from a Hong Kong-based logistics company and an AI technology firm in China to bypass U.S. export controls. Their arrest follows the guilty pleas of Alan Hao Hsu, 43, and his company, Hao Global LLC, for similar smuggling and unlawful export activities. Hsu and his associates allegedly exported at least $160 million in export-controlled Nvidia GPUs.
Reactions and Future Implications
In response to the arrests, a spokesperson for the Chinese Embassy in Washington stated that the Chinese government expects its citizens abroad to adhere to local laws while protecting their rights and interests. Meanwhile, a representative from Nvidia noted that security measures regarding the sale of older generation GPUs on the secondary market are rigorous. “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,” the spokesperson remarked.
The legal ramifications for those involved could be severe. Hsu is facing a potential sentence of up to 10 years in federal prison, with sentencing scheduled for February 18, 2024. Additionally, Hao Global LLC could be fined up to twice the gross gain from the offense. Yuan has been charged with conspiracy to violate the Export Control Reform Act, facing a maximum of 20 years in prison if convicted. Gong also faces up to 10 years for conspiracy to smuggle goods from the U.S.
As the case unfolds, it underscores the growing tension surrounding the export of critical technology and the implications for international relations and national security.
