Three people have been charged in New York for allegedly conspiring to smuggle Nvidia AI chips into China.

According to the US Department of Justice, Yih-Shayn Liaw and Ting-Wei Sun, also known as Wally and Willy, respectively, have been arrested, while Ruei-Tsang ‘Steven’ Chang remained a fugitive.

Sun and Chang are Taiwanese citizens, while Liaw is a US-citizen and a co-founder of Supermicro. The court documents did not name Supermicro as the employer of the accused, instead stating that they all worked for the same US manufacturer.

Supermicro noted that Liaw worked as an SVP of business development, while Chang was a sales manager for the company in Taiwan, and Sun is a contractor. All have since been placed on leave, and Sun’s contract has been terminated, the company said.

Prosecutors allege that the scheme involved the defendants repackaging Supermicro servers into unmarked boxes to disguise the contents and using ‘dummy’ replica servers to fool audits. Surveillance footage shows individuals using a hair dryer to move serial numbers from real servers to dummy servers. The defendants then used a company based in Southeast Asia as a “pass-through entity” to ship the chips from Taiwan to China using third-parties.

According to the indictment, the pass-through entity became one of Supermicro’s largest customers in 2024, accounting for $99.7 million in revenue in the final quarter of that financial year.

US-made AI chips have long been subject to export controls by the US government, and while the Trump administration recently gave the green light for certain Nvidia and AMD chips to be purchased by Chinese companies. However, the exports are subject to a number of stringent provisions, such as third-party lab testing and case-by-case approval, and GPUs more powerful than Nvidia’s H200s are allowed to be exported.

“The conduct by these individuals alleged in the indictment is a contravention of the company's policies and compliance controls, including efforts to circumvent applicable export control laws and regulations,” Supermicro said in a statement posted to its website. “Supermicro maintains a robust compliance program and is committed to full adherence to all applicable US export and re-export control laws and regulations.”

The news comes as Supermicro continues to recover from a 2024 auditing scandal that saw the company forced to set up a special committee to investigate concerns over its accounting practices.

While the committee reported in December 2024 that it found “no evidence of fraud or misconduct” on the part of management or the board, it did recommend Supermicro replace its CFO and listed five “deficiencies” and “material weaknesses” it had identified in its internal control over financial reporting.