Federal prosecutors in Los Angeles have arrested a California man accused of smuggling more than $300 million in export-controlled computer servers packed with graphics processing units (GPUs) to China. The owner of a City of Industry-based technology company called Earthmade Computer allegedly routed the hardware through Malaysia and Singapore between 2023 and 2024, using false shipping documents to conceal the true end destinations.
What happened?
According to a federal indictment returned on September 29, the company owner purchased high-end computer servers containing U.S.-manufactured GPUs, then shipped them to third countries where no export license is required. Once the cargo reached those locations, he allegedly worked with co-conspirators to re-export the servers to China, in violation of U.S. export control laws administered by the Department of Commerce.
The shipments were disguised using false documentation that misrepresented the end users and final destinations. Prosecutors say the company owner knew the actual buyers were in China and knew U.S. regulations barred such transfers to protect national security.
How the scheme worked?
The court records show specific transactions tied to the operation’s size and method.
- Initial purchase: In January 2024, the owner emailed a co-conspirator about a Malaysian transshipment company that wanted to buy 70 servers containing export-restricted GPUs. He attached an export compliance form acknowledging that the servers could not legally go to China without a license.
- Order placed: Later that month, he submitted a purchase order to a U.S. manufacturer for 27 of those servers, worth about $7.6 million. The packing list explicitly stated the shipment contained export-controlled servers that could not be sent to China without a license.
- Routing: The servers were shipped from Los Angeles to Kuala Lumpur, Malaysia. From there, a co-conspirator emailed a Malaysian government official in March 2024 confirming that the 27 servers had been transshipped to a China-based buyer.
- Scale: Between January and October 2024 alone, Earthmade Computer received more than $176 million from two Malaysia-based shipment companies tied to the scheme. Total alleged value across the case exceeds $300 million.
What are the charges?
Three counts appear in the indictment:
- Conspiracy to violate the Export Control Reform Act and the Export Administration Regulations
- Outbound smuggling
- Conspiracy to commit money laundering
If convicted on all charges, the defendant faces a maximum of 20 years in prison for the export control conspiracy count, 20 years for the money laundering conspiracy count, and 10 years for the smuggling count. The case is being investigated by the FBI’s Counterintelligence and Espionage Division, the Department of Defense Office of Inspector General’s Defense Criminal Investigative Service, and the Commerce Department’s Bureau of Industry and Security Office of Export Enforcement.
Why does this case matter?
The United States has long restricted the export of top-end AI chips to China, citing national security and the risk that advanced computing hardware could strengthen foreign military capabilities. Smuggling cases have become a growing concern for both chipmakers and law enforcement, with prosecutions targeting shell companies, transshipment hubs, and individuals willing to falsify paperwork.
The Justice Department and Commerce Department have signaled that export enforcement is a priority. Investigators from multiple agencies collaborated on the case, and the indictment’s detailed financial records suggest prosecutors are building a paper trail of payments, purchase orders, and emails showing deliberate intent.
What is the current status?
The 38-year-old San Gabriel man was arrested on Wednesday and is expected to make his initial court appearance in the Central District of California. An indictment is merely an allegation, and the defendant is presumed innocent until proven guilty beyond a reasonable doubt. The investigation remains active.
Federal authorities have not publicly named the manufacturer of the GPUs in this case. The indictment refers to “companies that specialize in SI computing,” using the abbreviation the government now applies to advanced AI applications.
FAQ
What is the alleged smuggling scheme?
A California man is accused of buying export-controlled AI servers containing U.S.-made GPUs and shipping them to Malaysia and Singapore, where no export license is required, before re-routing them to China. He allegedly used false paperwork to hide the true end users and destinations.
How much were the AI servers worth?
Prosecutors say more than $300 million worth of export-controlled computer servers were smuggled to China over the course of the alleged scheme, which ran from 2023 to 2024. Earthmade Computer received more than $176 million from two Malaysia-based shipment companies between January and October 2024 alone.
What penalties does the defendant face?
If convicted on all three counts, the defendant faces up to 20 years in prison for the export control conspiracy charge, 20 years for the money laundering conspiracy charge, and 10 years for the smuggling charge. He has been indicted but not yet convicted, and is presumed innocent under U.S. law.
This article summarizes reporting from thenextweb.com.