California Man Charged in Alleged $300M AI Server Smuggling Scheme to China
California Man Charged in Alleged $300M AI Server Smuggling Scheme to China
Federal prosecutors have charged a California technology executive with allegedly helping route more than $300 million in export-controlled computer servers to China through third-party countries.
Greg Lui, 38, owner of Earthmade Computer Inc., faces federal charges for allegedly shipping export-controlled computer servers to China without required Commerce Department licenses between 2023 and 2024, according to the Justice Department.
Prosecutors say Lui and unnamed co-conspirators bought servers containing high-end GPUs, then routed them through Malaysia and Singapore, countries that don’t require export licenses for such purchases, before illegally re-exporting them to China.
They allegedly gave US manufacturers false documentation claiming the equipment was destined for permissible end users.
“This defendant allegedly used false paperwork and shipments through third countries to smuggle more than $300 million in export-controlled computer servers to China,” said First Assistant U.S. Attorney Bill Essayli. “We will aggressively prosecute those who put our national security at risk for profit.”
The money trail
From January to October 2024, Earthmade received more than $176 million from two Malaysia-based shipment companies, according to the indictment. In one transaction, Lui allegedly ordered 27 servers containing Nvidia H100 GPUs for approximately $7.6 million and shipped them from Los Angeles to Kuala Lumpur.
A co-conspirator later emailed a Malaysian official confirming the servers had reached a China-based buyer.
Lui faces one count each of conspiracy to violate the Export Control Reform Act, outbound smuggling, and conspiracy to commit money laundering. If convicted on all charges, he could face up to 50 years in prison.
The case adds pressure on AI chip export controls
The case exposes uncomfortable questions for Nvidia, which has faced mounting scrutiny over whether its export compliance systems can catch sophisticated smuggling operations. The company told Bloomberg “less than one half of one percent” of its products have allegedly been diverted to China.
“This case shows yet again that smuggling is a losing proposition — legally, economically and technically,” Nvidia said, per Bloomberg. “Our work with law enforcement has led to prosecutions, and we will continue to engage with law enforcement.”
Advertisement
But Bloomberg investigations suggest the shadow market may be far larger than reported, with hundreds of thousands of AI chips potentially flowing through a sprawling underground trade.
For chipmakers and distributors, cases like this could increase pressure to strengthen end-user verification, shipment monitoring, and reseller due diligence, particularly in markets frequently used as transit points.
What this means for the AI supply chain
Every smuggling prosecution ratchets up regulatory pressure on US chip manufacturers. Companies may face pressure to implement more aggressive buyer verification, potentially slowing legitimate sales to Southeast Asian customers who now face heightened scrutiny.
For Chinese AI developers, the crackdown threatens access to the very hardware powering their most advanced models. While China has invested heavily in domestic alternatives like Huawei’s chip lineup, the performance gap with Nvidia’s latest offerings remains significant.
Smuggled A100 and H100 GPUs, while not Nvidia’s newest, still provide substantial computing power for training large language models.
More must-read AI coverage
The user ripple effect
The case is another reminder that AI hardware has become part of a much broader technology and national-security dispute between the United States and China.
For technology companies, the immediate takeaway is compliance rather than scarcity: distributors and buyers handling advanced GPUs can expect closer scrutiny of where hardware is going, who ultimately controls it, and whether resale or re-export violates US restrictions.
The outcome of Lui’s case will depend on the evidence presented in court. But the alleged scheme shows why regulators are increasingly focused on the entire supply chain, not just direct shipments from US manufacturers to restricted destinations.
Advertisement
Other news: A Tokyo court has ruled that a person’s voice can receive protection under publicity rights, setting an important precedent after Japanese actor Kenjiro Tsuda challenged TikTok videos allegedly using an AI-generated imitation of his voice.
About Author
