U.S. Authorities Shut Down China-Linked AI Tech Smuggling Network

U.S. authorities have dismantled a China-linked trafficking network accused of moving restricted Artificial Intelligence (AI) technology out of the country and attempting to ship at least $160 million worth of controlled Nvidia GPUs to China, Hong Kong, and other prohibited destinations.

The investigation, known as “Operation Gatekeeper,” has resulted in two arrests, a guilty plea, and the seizure of more than $50 million in high-performance chips and cash.

U.S. Attorney Nicholas J. Ganjei for the Southern District of Texas stated, “These chips are the building blocks of AI superiority and are integral to modern military applications.”

According to court filings, Alan Hao Hsu, also known as Haochun Hsu, 43, of Missouri City, Texas, and his company, Hao Global LLC, pleaded guilty on Oct. 10, to smuggling and unlawful export activities. Investigators say Hsu and associates falsified shipping paperwork and misclassified high-speed Nvidia H100 and H200 Tensor Core GPUs—used in AI and high-performance computing—to conceal their shipment to the People’s Republic of China, Hong Kong, and other locations requiring export licenses. More than $50 million in PRC-origin wire transfers flowed to Hsu and his company to finance the scheme.

Authorities report that the GPUs were routed through U.S. warehouses where workers removed Nvidia labels and replaced them with the name “SANDKYAN,” a fictitious company. The hardware was then prepared for export using paperwork describing the shipments as generic computer parts.

Two additional suspects were arrested for their roles. Benlin Yuan, 58, a Canadian citizen living in Mississauga, Ontario, and CEO of a Virginia-based subsidiary of a Beijing IT firm, was arrested on Nov. 28 and charged with conspiring to violate the Export Control Reform Act. Fanyue Gong, also known as Tom Gong, 43, a PRC citizen in Brooklyn, New York, was arrested on Dec. 3 and charged with conspiring to smuggle restricted technology.

Charging documents state that Yuan and Gong worked with employees of a Hong Kong logistics company and a China-based AI firm to obtain GPUs through straw purchasers, create false paperwork, redirect shipments, and instruct intermediaries to hide PRC involvement. Yuan allegedly coached individuals on what to tell inspectors and discussed providing false information to retrieve detained equipment.

If convicted, Yuan faces up to 20 years in prison and a $1 million fine. Gong faces up to 10 years. Hsu faces up to 10 years at sentencing on Feb. 18. Yuan and Gong remain in custody.

The Commerce Department’s BIS Office of Export Enforcement, Homeland Security Investigations, and the FBI are leading the investigation, with prosecution by the U.S. Attorney’s Office for the Southern District of Texas and the Justice Department’s National Security Division.