NEW YORK CITY — Three people affiliated with Supermicro have been charged with conspiring to smuggle advanced Nvidia AI chips into China in violation of U.S. export controls. The U.S. Attorney for the Southern District of New York filed charges against Wally Liaw, Steven Chang, and Willy Sun.

Each of the three men is charged with one count of conspiring to violate the Export Controls Reform Act, which carries a maximum prison term of 20 years. They also face charges of conspiring to smuggle goods and conspiring to defraud the United States, each carrying a maximum prison term of five years.

The indictment alleges that Liaw, Chang, and Sun conspired to sell $2.5 billion worth of servers to a company based in Southeast Asia. The Southeast Asia-based company repackaged boxes and sent $510 million worth of servers containing banned chips to final destinations in China.

Liaw, Chang, and Sun are charged with selling servers to China that included Nvidia B200 and H200 graphics processing units without a required license. In 2022, the U.S. tightened its export controls on advanced artificial intelligence chips to China, citing national security concerns, and banned sales of these specific Nvidia chips to China without a license.

"They did so through a tangled web of lies, obfuscation, and concealment — all to drive sales and generate revenues in violation of U.S. law," said Jay Clayton, U.S. Attorney for the Southern District of New York.

Wally Liaw and Willy Sun were arrested in connection with the alleged smuggling scheme, while Steven Chang remains a fugitive. Supermicro placed Liaw and Chang on administrative leave and terminated its relationship with Sun effective immediately.

"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," a Supermicro spokesperson said. The company stated it maintains a robust compliance program and is committed to full adherence to all applicable U.S. export and re-export control laws and regulations.

Supermicro's stock price fell by more than 25% in pre-market trading following the announcement of the charges. "Unlawful diversion of controlled U.S. computers to China is a losing proposition across the board — NVIDIA does not provide any service or support for such systems, and the enforcement mechanisms are rigorous and effective," an Nvidia spokesperson said.