In early August 2025, the U.S. Department of Justice announced federal charges against two Chinese nationals, Chuan Geng (28) of Pasadena and Shiwei Yang (28) of El Monte, California. They are accused of orchestrating a scheme to export tens of millions of dollars’ worth of advanced Nvidia AI chips—specifically H100 GPUs and RTX 4090 graphics cards—to China, bypassing U.S. export controls.
Federal court filings allege that from October 2022 through July 2025, the two ran a company called ALX Solutions Inc., founded in 2022 in El Monte, which they used to carry out more than 20 shipments of restricted chips.
Authorities say payments for the shipments came not from the supposed intermediaries in Singapore or Malaysia but from companies based in China and Hong Kong—including a $1 million payment in January 2024.
Smuggling Tactics & Routes
2.1 Use of Freight Routes Through Southeast Asia
Key to the scheme were shipping routes through Singapore and Malaysia, widely used as transshipment points to obscure true chip destinations. Shipments were falsely declared as destined for companies in those countries, but investigation revealed many recipients didn’t exist or that the goods never arrived at the declared addresses.
For example, one invoice worth $28.45 million was supposedly for a Singapore company, but U.S. export officials in Singapore found no such company at the address and no record of the shipment arriving.
2.2 False End‑User Claims
ALX Solutions misrepresented end-users to U.S. suppliers, claiming orders were for legitimate foreign customers in Singapore or Japan. In reality, the shipments ultimately reached Chinese clients and no U.S. export license—required under the Export Control Reform Act—was ever sought or received.
2.3 Incriminating Evidence from Seized Devices
Law enforcement seized phones and company records from ALX Solutions’ office. Incriminating communications showed the defendants discussed removing tracking devices and routing chips through Malaysia to evade detection. One internal message reportedly stated: “Pay attention to see if there is a tracker on it… Fucking US Trump administration, who knows what they will do”.
The Chips, Their Significance & Export Rules
3.1 H100 and RTX 4090 GPUs
Both the Nvidia H100 AI accelerator and the RTX 4090 GPU are subject to stringent U.S. export controls. The H100—widely used to train large language models—and the 4090 are high-end GPUs critical for AI research and applications, including autonomous vehicles, medical diagnostics, and cloud-based big data processing.
3.2 Export Licensing Regime
On October 7, 2022, the U.S. Commerce Department expanded export controls targeting “advanced computing” and semiconductor manufacturing items to China—a policy fully in effect by October 21, 2022. This required companies to obtain licenses before exporting certain chips, including H100 and other advanced GPUs. ALX Solutions’ foundation closely follows the initiation of these licensing rules.
Legal Consequences & Court Proceedings
4.1 Charges & Maximum Penalties
Geng and Yang are charged with violating the Export Control Reform Act, a felony that carries up to 20 years in federal prison. Yang also faces immigration violations—she reportedly overstayed her U.S. visa, making her an undocumented immigrant at the time of arrest.
4.2 Bail and Hearings
Geng surrendered voluntarily and was released on $250,000 bond. Yang remains in custody pending a scheduled detention hearing on August 12, 2025, and their formal arraignment is set for September 11.
Broader Economic & Policy Context
5.1 Persistent Smuggling Despite Restrictions
Despite tightened export controls, reports estimate over $1 billion worth of Nvidia GPUs—including illicitly trafficked B200s and others—reached China through black‑market channels in a recent three‑month period. These chips continue to surface on Chinese social platforms and online sellers, with products ranging from RTX 5090 GPUs to full rack servers.
5.2 Previous Cases and Enforcement Limits
A similar smuggling ring in Singapore involving Dell and Super Micro servers potentially carrying Nvidia chips highlighted the use of front companies and fraudulent invoices to route U.S.-origin semiconductors into China.
Academic research, such as Whack‑a‑Chip: The Futility of Hardware‑Centric Export Controls, argues that even with tight hardware restrictions, Chinese AI firms adapt by squeezing more power from less capable chips or maximizing gray‑market access.
5.3 U.S. Response and Next Steps
Beyond enforcing criminal prosecution, U.S. authorities—including the Commerce Department’s Bureau of Industry and Security and the FBI—are exploring new measures. These could include embedding hardware-level tracking or stronger international cooperation to close loopholes in export enforcement.
Some analysts expect Washington may pressure countries like Malaysia, Singapore, and Thailand to crack down on transit routes used for chip smuggling. Tools might include tariffs, tougher customs protocols, and broader sanctions on non-cooperative entities.
Implications for Tech, Trade & Security
- National Security & AI Arms Race: U.S. export controls reflect concern that China’s access to leading-edge GPUs could help military and strategic AI programs. Cases like this underscore how smuggled hardware speeds that timeline.
- Supply Chain Integrity Risks: Even large, well‑known chipmakers and server vendors must guard against illicit resale or diversion after sale. Companies like Nvidia and Super Micro emphasize compliance, stating that illegally obtained chips receive no support or updates.
- Effectiveness of Policy: Despite legal frameworks, actual enforcement remains difficult. Smuggling routes using front companies and third-party countries continue to undermine export controls.
- International Dimensions: The case spotlights transnational smuggling involving actors across the U.S., Singapore, Malaysia, Hong Kong, and China—a gap in enforcement that needs coordinated response.
- Innovation vs Export Restriction Tradeoffs: Some experts caution that over‑restricting hardware flows may accelerate domestic chip development in China, potentially reducing U.S. leverage in the long run.
Timeline of Key Events
| Date | Event |
|---|---|
| Oct 7–21, 2022 | U.S. Commerce issues expanded export controls on Nvidia H100 and similar chips |
| Late 2022 | ALX Solutions founded in El Monte shortly after restrictions begin |
| Oct 2022 – Jul 2025 | Alleged timeline of more than 20 illicit shipments via Singapore/Malaysia channels |
| Jan 2024 | ALX receives $1M payment from China-based company |
| Dec 2024 | High-value shipment (~$28M) declared for fake Singapore company |
| Aug 5, 2025 | DOJ charges publicized; Geng surrenders; Yang arrested |
| Aug 12, 2025 | Detention hearing scheduled for Yang |
| Sep 11, 2025 | Arraignment scheduled for both defendants |
Legal & Business Fallout
8.1 Criminal Liability
If convicted, both defendants face up to 20 years in prison, given felony charges under the Export Control Reform Act. Yang may also face immigration removal proceedings due to her overstay.
8.2 Corporate and Supply Chain Reputational Risk
Companies like Nvidia and Super Micro emphasize strong compliance protocols and disclaim support for chips diverted illegally. However, cases like this may prompt suppliers to tighten controls on resale practices and downstream tracking.
8.3 Diplomatic and Policy Ripple Effects
The incident places pressure on countries that serve as transit hubs—particularly Singapore and Malaysia. U.S. policymakers are pushing for stronger enforcement measures abroad, potentially linking trade perks or sanctions to cooperation in semiconductor controls.
Broader Takeaways & Future Outlook
- Export controls remain vulnerable: As shown by the case, front companies and third‑party routing continue to undermine U.S. policy.
- U.S. must balance enforcement with international cooperation and perhaps invest in traceable hardware or remote kill-switch technology.
- China’s AI capabilities continue advancing, partly through illicit hardware flows but also via domestic innovation efforts.
- Industries must strengthen due diligence: Suppliers, freight forwarders, and financing channels need deeper scrutiny of end‑use and recipients.
- Legal precedents may deter others, but only if enforcement is consistent and convictions result.
