California man charged with smuggling $300M in Nvidia AI servers to China

The defendant is Greg Lui, 38, also known as Yiu Kong Lui, of San Gabriel, California. According to the indictment, he owns Earthmade Computer Inc., a closely held technology company in the City of Industry, east of downtown Los Angeles.

A federal grand jury returned the three-count indictment on September 29. Lui was arrested on Thursday and was expected to make his first court appearance and be arraigned that afternoon, the Justice Department said.

He is charged with:

• Conspiracy to violate the Export Control Reform Act and the Export Administration Regulations
• Outbound smuggling
• Conspiracy to commit money laundering

Prosecutors argued in a court filing that Lui should be held without bail because of a "serious risk" he would flee, Free Malaysia Today reports. The court docket did not yet list a lawyer for Lui, Courthouse News reports.

According to the indictment, the scheme ran from 2023 to 2024. Prosecutors describe it in four steps:

• Buying: Lui and others used Earthmade to buy high-end servers with GPUs from US manufacturers.
• False paperwork: they gave the manufacturers documents claiming the servers were going to allowed buyers in places that didn't need an export license.
• The detour: freight forwarders shipped the servers to countries such as Malaysia and Singapore, where no US license was required.
• The real destination: once the servers arrived, Lui allegedly worked with co-conspirators to reship them to buyers in China.

Prosecutors say Lui knew the true end users were in China all along. From January to October 2024, Earthmade received more than $176 million from two Malaysia-based shipment companies as part of the scheme, according to the indictment.

The indictment points to one shipment in particular, as described in the Justice Department release.

• January 2024: Lui emailed a conspirator that a Malaysian transshipment company wanted to buy 70 servers with export-restricted GPUs. He attached an export compliance form showing the Malaysian company knew US law restricted the sale, transshipment or export of those servers.
• Later that month: Lui placed a purchase order with a US manufacturer for 27 of those servers for about $7,614,000. They were shipped from Los Angeles to Kuala Lumpur.
• The packing list: it stated the shipment held 27 servers with GPUs that were export controlled and couldn't go to China without a license.
• March 2024: a co-conspirator emailed a Malaysian government official that the 27 servers had in fact been transshipped to a buyer based in China.

Prosecutors said this order covered servers containing Nvidia H100 GPUs, according to Free Malaysia Today.

The US bars exporting high-end GPUs like these to China without a license. According to the Justice Department, US regulations say such chips could make significant contributions to the military potential of other nations.

The H100 is a big part of that story. Courthouse News, citing a Commerce Department affidavit from an earlier case, says the H100 packs 80 billion transistors and is designed specifically for AI work, from training language models to building self-driving systems.

Many of Nvidia's most advanced chips have been off limits to Chinese buyers, Courthouse News notes, while some less advanced chips can be shipped to China with a license. Nvidia itself is not accused of wrongdoing in the case, and it did not immediately respond to a request for comment, Free Malaysia Today reports.

The big picture: Malaysia and Singapore keep showing up in these cases because they sit at the center of the region's chip and data center boom. We looked at that side of the story in our piece on how the AI boom transformed Singapore's economy.

The case was announced jointly by the Justice Department's National Security Division, federal prosecutors in Los Angeles, the FBI and the Commerce Department's Bureau of Industry and Security.

"This defendant allegedly used false paperwork and shipments through third countries to smuggle more than $300 million in export-controlled computer servers to China. We will aggressively prosecute those who put our national security at risk for profit."

That's First Assistant US Attorney Bill Essayli for the Central District of California. FBI Assistant Director Roman Rozhavsky said the investigation revealed that Lui allegedly sold the Chinese government hundreds of millions of dollars' worth of US technology.

Assistant Attorney General for National Security John A. Eisenberg called the technology "the defining technology of the era," and said his division would protect the US advantage in the chips that power it from illegal diversion.

The Pentagon's investigators were involved too. John E. Helsing, who leads the Western Field Office of the Defense Criminal Investigative Service, said these technologies "provide core advantages to U.S. forces," and that keeping them safeguarded prevents adversaries from exploiting them.

You may notice officials kept saying "Super Intelligence" instead of AI. Courthouse News reports that follows a presidential executive order from two days earlier requiring federal agencies to use "super intelligence" rather than "artificial intelligence."

By the numbers: this is far from the first case of its kind.

• Last year: federal prosecutors in Los Angeles charged two Chinese nationals living in Southern California with shipping tens of millions of dollars' worth of Nvidia chips to China, also through Malaysia and Singapore, Courthouse News reports.
• March this year: authorities charged a co-founder of Super Micro Computer with illegally diverting billions of dollars in Nvidia chips to China, according to Free Malaysia Today. He pleaded not guilty.

Courthouse News adds that some US lawmakers want even tighter limits on Nvidia sales to China, citing the potential military uses of AI.

The Commerce Department's Office of Export Enforcement, the Defense Criminal Investigative Service and the FBI are investigating. Prosecutors are also handling civil and criminal forfeitures of seized property, the Justice Department said.

The penalties: if convicted on all counts, Lui faces up to 20 years in prison on the export control conspiracy count, up to 20 years on the money laundering count and up to 10 years on the smuggling count.

The catch: none of this is proven. As the Justice Department notes, an indictment is merely an allegation, and Lui is presumed innocent until proven guilty in court.

• No direct effect on buyers: this case is about servers allegedly diverted to China, not about chips sold to US customers.
• Tighter checks are likely: cases like this push manufacturers and resellers to look harder at who really ends up with their hardware.
• Watch the court case: Lui's detention hearing and arraignment come first, and the charges remain allegations until a court rules.