Nvidia Senior Manager Indicted in Scheme That Smuggled 74 AI Servers to China

Nvidia senior manager linked to Supermicro scheme smuggling AI servers to China

Taiwan has indicted nine people -- reportedly including an Nvidia senior manager and two Supermicro employees based in the country -- who allegedly helped forge documents to cover up illegal exports of high-end AI servers to China in violation of US export controls. On Monday, Reuters reported that prosecutors in Keelung did not release any names but confirmed that the suspects were "charged with breach of trust and document forgery." One suspect linked to a related case remains at large, accused of the "siphoning of funds from a distributor company involved" in helping China get access to restricted Nvidia chips. Since 2022, the US has required a license to export semiconductors to China, with the intent of protecting national security by staying ahead of China in the AI race. But after the US arrested Supermicro co-founder Wally Liaw in March for allegedly funneling $2.5 billion in restricted AI servers to China since 2024, Taiwan launched a separate probe to learn more about the scheme. Taiwan's investigation found that co-conspirators attempted to falsify documents to make it appear that 130 B300 servers were installed and in use at a Taiwan facility. But 74 of those servers "were ultimately exported and delivered to Chinese customers," Reuters reported, while the rest, 56, were intended to go to China but were blocked once Taiwanese customs officials "detected irregularities." Ars could not reach Supermicro or Nvidia for comment. Huang urged Supermicro to "fix" problem In a statement to PC Mag, Supermicro has previously confirmed that it's cooperating with Taiwanese investigators. "Supermicro is committed to protecting our advanced technologies and intellectual property. We are working closely with Taiwanese authorities on recent events, which underscore the importance of continued collaboration across industry and government to strengthen safeguards, enhance supply chain visibility, and facilitate the enforcement of export control laws," Supermicro said. The firm is not a target of the probe, Supermicro emphasized, which so far has targeted at least 12 locations to uncover suspected smugglers. Although US employees are believed to be integral to the scheme, Lauren Barden-Hair, an expert in China's power over multinational firms across Southeast Asia, posted an op-ed in The Hill, noting that the US found that "a nameless Southeast Asian firm" was "at the heart of the operation." That firm allegedly coordinated with co-conspirators at Supermicro and Nvidia, succeeding for years at ensuring that China wasn't completely blocked from accessing Nvidia's most advanced AI chips. Both US firms will likely need to assess the steps they take to comply with US export controls. In May, before any Nvidia employees were linked directly to the scheme, Nvidia CEO Jensen Huang was highly critical of Supermicro for its failing compliance program, urging that a fix was needed, Tom's Hardware reported. "We insist our partners are compliant. We hope that they will enhance and improve their regulation compliance and prevent that from happening in the future," Huang said at the time. Supermicro has confirmed that it's already made changes. It also fired several employees that an internal investigation connected to the Chinese AI server scheme, Tom's Hardware reported. Conducted by a third party, that probe cleared Supermicro's current senior officials of any involvement. However, the company may have been neglectful in not noticing that "billions of dollars' worth of hardware was being sent to questionable clients," Tom's Hardware noted. Spooked investors have even sued Supermicro for securities fraud, fearing that the company's sales may be dominated by such illicit sales. Taiwanese prosecutors said that all employees indicted were "fully aware" that Nvidia and Supermicro have "rigorous internal control procedures" regarding exports to China, Reuters reported. The US and Taiwan have recently tightened those controls, prosecutors said, yet employees' scheme only got more brazen, Barden-Hair's op-ed suggested. Supermicro's team allegedly was so confident that it could evade US and Taiwanese export controls that it made "increasingly daring deals" to get China the computing power it wanted. Taiwan officials announced that they recently uncovered more of the same misconduct. They alleged that Nvidia's manager and Supermicro employees "colluded with one another at various levels for enormous profit, illegally exporting high-end servers, increasing corporate compliance costs, and severely damaging our nation's international image," Taiwan authorities said Monday. US may cut off China's remote access to AI The US is determined to cut off China's access to Nvidia's AI chips and servers, and it's seemingly taking a two-prong approach to tighten controls even further. First, lawmakers are weighing a bill called the Remote Access Security Act (RASA), which would allow US export controls to extend to include remote cloud-based access to critical hardware and software, CNBC reported. Passing that law would allow rule-making that could cut China off from exploiting a known loophole that currently impedes the US from interfering with its remote access to Nvidia chips via data centers in Southeast Asia. According to industry experts, remote access to computing power is a key factor driving Chinese models' capability gains for companies including Alibaba, ByteDance, and Tencent, CNBC reported. And China will apparently soon have more data centers nearby to potentially expand remote access to compute, as hyperscalers plan to multiply the number of facilities in the region, leaping from two data centers today to 31 planned projects underway. That bill will likely face industry pushback, CNBC suggested, since cloud providers would bear the cost of that new compliance regime, including implementing better know-your-customer protocols. For the US, ending remote access may seem like an increasingly urgent priority, but the Supermicro scandal shows that evading controls can often be as easy as forging a document in an overburdened system where neither top executives nor customs officials managed to flag billions of dollars in fraudulent diversions. However, the global crackdown on employees striking shady deals to export AI servers to China does come as Nvidia recently announced it's increasing the prices of AI servers by 15 percent. So, at the very least, any employees motivated by the potential of gaining even higher profits from illicit sales will seemingly be on notice. In her op-ed, Barden-Hair suggested that the US was blindsided by Chinese AI server smuggling because it failed to learn from its own history. In 1998, the Senate Committee on Governmental Affairs investigated "Chinagate," a campaign finance scandal where China used Southeast Asian companies as a cover to try to influence election outcomes. In that scheme, China learned that cultivating ties with business moguls -- particularly those who had deep financial investments in China but were based just outside its sovereign territory -- provided the "ideal cover," Barden-Hair said. And similarly, the unnamed Southeast Asian firm at the heart of the Supermicro scandal appears to follow the same playbook, she said. "It is easy to point out errors in judgment after a disaster, and US export control authorities deserve support and praise for their efforts to protect national security," Barden-Hair said. "But it is important that we take the right lessons from the Supermicro scandal amid our shaming of the guilty, and remember the hard-earned lessons of the past. With the anonymous company the Justice Department refers to, China is showing us, again, that its pawns are scattered beyond its borders, and that its financial tentacles have a real and devastating influence."

Taiwan reportedly indicted NVIDIA employees for exporting prohibited AI servers to China - Engadget

The nine individuals are accused of 'severely damaged our nation's image,' prosecutors said. Although the US has relaxed its restrictions on NVIDIA AI chip exports to China, illegal exports apparently still take place. Prosecutors in Taiwan just indicted nine individuals, including NVIDIA and Super Micro employees, for illegally bringing AI servers into China, Reuters reported. The defendants "colluded with one another at various levels for enormous profit, illegally exporting high-end servers, increasing corporate compliance costs, and severely damaging our nation's international image," prosecutors from the northern city of Keelung said in a statement. They did this, the team added, despite being "fully aware" of NVIDIA and Super Micro's "rigorous" export control procedures. Although NVIDIA is an American company, most of its chips are manufactured by the Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest chip maker by far. TSMC's latest Blackwell AI chips are manufactured in Phoenix, Arizona, but are still shipped to Taiwan for advanced packaging prior to final assembly. The US has banned the sale of cutting-edge AI tech from NVIDIA and others to China since 2022. Recently, it has allowed sales to China of previous-generation products like H200 chips that are several years old. Taiwan is ultra-strict about exports of newer technology, lest it displease US regulators and, in particular, the Trump administration. Despite Taiwan's clampdown, bad actors have found ways to get such chips into China. In one instance, $1 billion worth of server racks may have been shipped through Southeast Asian countries like Thailand or Malaysia to circumvent US export controls. In another case, the US charged three people with allegedly exporting $3.5 billion worth of AI servers to China, again by routing them through third-party countries.

Taiwan indicts Nvidia manager over chips shipped to China

Prosecutors want five years for the employee they call the core figure in a scheme that moved 74 servers of B300 chips, in a trade Europe's own export list does not cover Taiwanese prosecutors have indicted a senior Nvidia manager and eight others over an alleged scheme that shipped 74 servers containing B300 chips to China via Japan and Indonesia. They are seeking five years for forgery and breach of trust. The first known criminal case against an Nvidia employee over AI chip smuggling has reached indictment. Taiwanese prosecutors have charged a senior manager surnamed Chang, whom they call the "core figure" of the scheme, and are seeking five years for forgery and breach of trust. He was detained in July, and Bloomberg has been unable to reach him since. Nvidia as a company has not been accused of wrongdoing. The volumes are modest by black-market standards and specific by legal ones. Seventy-four servers containing high-end B300 chips allegedly reached China through Japan and Indonesia, and another 56 were seized before they could leave. Eight others were charged alongside him. They include two senior Super Micro employees and staff from four more firms, among them the reseller Albatron and Flying Tiger, named as the purported end user. The economics explain the risk. TNW has reported B300 servers changing hands in China for around $1mn apiece, close to double the American price. What should trouble the industry is the safeguard that failed. Super Micro's Taiwan arm will not sell to a buyer that has not passed checks by its own and Nvidia's staff, including an in-person audit for orders of eight units or more. Prosecutors say that audit was staged. Chang and one of the indicted Super Micro employees took "unsuspecting" colleagues to a data centre and concealed that Flying Tiger had never leased enough space for the hardware. Chang then reported the inspection as complete. Super Micro approved a sale of 130 servers, delivered in three phases, of which 74 were routed onward to Chinese buyers. Nvidia's answer has been to shrink the approved list. The company has cut more than half its Asian customers from the whitelist that Flying Tiger had managed to join. Europe watches this with a gap in its own rules. Advanced AI accelerators are not controlled on the EU's dual-use list, after a Russian veto at the Wassenaar Arrangement blocked multilateral agreement, leaving national measures and American extraterritorial reach to do the work. So the controls that caught this were Taiwanese and American. The Commission's reform of its own export regime has been pending since last year, while the servers move through whichever jurisdiction is slowest.

Taiwan indicts nine over alleged illegal export of AI servers to China

Semiconductor powerhouse Taiwan is the world's largest producer of ⁠advanced ⁠chips used in AI applications. Prosecutors this year investigated the suspected illegal export of servers equipped with Nvidia chips subject to US export controls. Taiwan prosecutors said on Monday they indicted nine people, including employees of Nvidia and Super Micro, accused of illegal export of artificial intelligence servers to China. Semiconductor powerhouse Taiwan is the world's largest producer of ⁠advanced ⁠chips used in AI applications. Prosecutors this year investigated the suspected illegal export of servers equipped with Nvidia chips subject to U.S. export controls. Washington has imposed curbs since 2022 making it illegal for such semiconductors to be exported ⁠or sold in China. In a statement, the prosecutors in the northern port city of Keelung ⁠said the defendants, whose full names they did not state, were "fully aware" that both Nvidia and Super Micro have "rigorous internal control procedures" regarding exports. However, the defendants "colluded with one another at various levels for enormous profit, illegally exporting high-end servers, increasing corporate compliance costs, and severely damaging our nation's international image", they added. Neither Nvidia nor Super Micro immediately responded ⁠to requests for comment. Taiwan has tightened export controls in recent years to keep advanced technology and know-how from reaching China, which claims the democratically governed island as its own territory despite the strong objections of the island's government.

Nvidia worker among 9 charged in Taiwan chip smuggling case - The Korea Times

The United States restricts exports to China of advanced chips used for artificial intelligence systems, but Taiwanese prosecutors said that conduct is not a criminal offence in Taiwan. TAIPEI -- Nine people in Taiwan, including a Nvidia worker, were charged on Monday over the illegal export of artificial intelligence servers to China, Taiwanese prosecutors said. The indictments follow an investigation into the shipment of "high-end" AI servers made by Nasdaq-listed Super Micro Computer and containing advanced Nvidia chips to China in violation of U.S. export controls. Eight of the nine defendants were charged with breach of trust and forging documents to smuggle 74 servers containing Nvidia chips to China, Keelung District Prosecutors Office said in a statement. Of those servers, 50 were transhipped through Indonesia, eight were sent via Japan and the rest were exported directly to China. An additional 56 servers were seized at Taiwan's border, the statement said. Three of the defendants have been charged with embezzlement. The United States restricts exports to China of the most cutting-edge silicon chips used to power artificial intelligence systems, designed by industry leader Nvidia. But it is not a criminal offence in Taiwan -- a situation lawmakers and experts say needs to change -- with Taiwanese prosecutors relying on other laws to go after offenders. The nine accused include two employees from Super Micro and one from Nvidia as well as one from Taiwan-listed Albatron Technology and another from Chief Telecom, prosecutors said. Neither Nvidia nor Super Micro immediately responded to AFP's request for comment. Prosecutors said they were seeking sentences of up to five years in jail for seven defendants who were "driven by the pursuit of exorbitant profits" to collude in the illegal export of the servers. "This not only increased corporate compliance costs but also severely damaged the nation's international image," the prosecutors said. They were seeking more lenient sentences for the other two defendants who had confessed to all charges and cooperated with the investigation.

Nvidia manager indicted in Taiwan AI chip smuggling case By Investing.com

Investing.com -- Taiwanese prosecutors indicted a senior Nvidia Corp. manager along with eight others for allegedly smuggling advanced AI chips into China, according to a Bloomberg report Monday citing people familiar with the matter. The case marks Taiwan's first known crackdown on the black-market trade of such accelerators. The Nvidia employee, surnamed Chang, allegedly organized the shipment of 74 servers containing high-end B300 chips into China via Japan and Indonesia, circumventing US trade restrictions. He was initially detained last month and could not be reached. Get instant alerts on market-moving headlines on InvestingPro -- now 55% off. The group also attempted to smuggle another 56 servers, which Taiwanese authorities seized, according to the indictment. Taiwan also indicted two senior employees of Super Micro Computer Inc., which manufactured the hardware, the report added. The Keelung District Prosecutors Office stated Monday that the group "colluded vertically and horizontally for exorbitant profits, illegally exporting high-end servers, increasing corporate compliance costs, and severely damaging Taiwan's international image." Washington has restricted China from purchasing American AI chips, but companies there have obtained the accelerators through a black market. US officials have alleged that billions of dollars worth of Nvidia hardware has reached China over the past few years. Prosecutors are seeking five years for Chang, whom they described as the "core figure" in the scheme, for forgery and breach of trust, the report said. Taiwan has not accused Nvidia as a company of any wrongdoing. Taiwan Semiconductor Manufacturing Co. serves as a close partner to Nvidia and leads a supply chain ecosystem critical to the company's chipmaking and product development.