Super Micro Co-Founder Arrested in $2.5B Alleged AI Chip Smuggling Operation

Yih-Shyan "Wally" Liaw, a co-founder of Super Micro Computer and a fixture in Silicon Valley's AI hardware ecosystem, was arrested Thursday along with two others on charges that they ran a years-long scheme to divert at least $2.5 billion worth of Nvidia-powered servers to China in violation of U.S. export controls, according to a Reuters report.

The indictment, unsealed in federal court in Manhattan, alleges that Liaw, a U.S. citizen and senior vice president of business development at Super Micro, worked with Ruei-Tsang Chang, a sales manager at Super Micro's Taiwan office, and Ting-Wei Sun, a contractor, to route servers containing controlled U.S. AI technology through intermediaries in Taiwan and Southeast Asia and ultimately into China, as detailed in a DOJ press release. Chang, a Taiwanese citizen, remains a fugitive.

The scheme was brazen. According to the DOJ, the conspirators shipped real servers — assembled in the United States and in Taiwan at Super Micro facilities — to a Southeast Asian intermediary, where they were transferred into unmarked boxes and forwarded to China. To keep compliance inspectors from discovering the diversion, they staged thousands of non-working "dummy" servers at facilities, leaving the real machines already en route to China. Prosecutors say surveillance video captured workers using hair dryers to remove labels and serial numbers from the real servers and transfer them to dummy units.

"The defendants' scheme became more brazen over time and resulted in massive quantities of servers with controlled U.S. artificial intelligence technology being sent to China," the Justice Department said.

The numbers are striking. The indictment says the operation generated approximately $2.5 billion in sales for the server maker since 2024. More than half a billion dollars' worth — $510 million — moved through the scheme in just the three-week window between late April 2025 and mid-May 2025.

The escalation is also notable. In late 2024, prosecutors allege Liaw pushed the Southeast Asian intermediary to adopt Nvidia's Blackwell architecture B200 chips, writing in a text message: "Roughly how many you can take by January? Feb? March? April? Just roughly forecast will be fine. Then we can propose to [Nvidia] with the way they can accept. This is the only way to have [Nvidia] to promise the B200 allocation so far as I know."

And in 2025, with the White House preparing new export rules for AI technology, Liaw reportedly sent the intermediary a link to the announcement, suggesting shipments would need to accelerate before the rules took effect.

The export controls at the center of this case date to 2022, when the U.S. began restricting sales of advanced AI chips to China without a license. Nvidia's offerings — particularly its Hopper and Blackwell architecture GPUs — sit at the top of the controlled list.

In a statement, Nvidia said strict compliance with export laws is a top priority. "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."

Super Micro emphasized that it was not named as a defendant. "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," the company said. Super Micro placed Liaw and Chang on leave and terminated its relationship with Sun after being informed of the charges on Thursday.

The company's shares fell 12% in extended trading following the news. Liaw controls roughly $464 million worth of Super Micro shares, according to FactSet.

Jay Clayton, the U.S. Attorney for the Southern District of New York and a former SEC chairman, was blunt: "Crimes involving sensitive technology must be met with swift action, otherwise the law is meaningless."

What this means for the AI chip landscape

The case exposes a persistent vulnerability in U.S. export controls: the difficulty of monitoring server shipments once they leave a manufacturer's facility. Intermediaries in friendly jurisdictions can serve as cutouts, making it difficult to trace where controlled hardware ultimately ends up.

For Nvidia, which dominates the AI training chip market, the indictment raises questions about how thoroughly it can monitor downstream use. The company has received licenses to export the H20 chip to China, and CEO Jensen Huang said this week that Nvidia is restarting manufacturing to fulfill H200 purchase orders from the country.

For Super Micro, the arrest of a founding figure arrives at a complicated moment. The company has been rebuilding credibility after an accounting scandal in 2018 led to auditor turnover and a near-Nasdaq-delisting. That narrative is now shadowed by allegations that one of its most prominent executives ran a massive smuggling operation for years.

The scale — $2.5 billion over roughly two years — suggests either significant gaps in export monitoring, or a compliance operation that was actively gamed by people with deep knowledge of the company's internal processes.

Liaw was well-known in Silicon Valley, regularly appearing at partner events. Photographs from Nvidia's recent developer conference show him standing near CEO Jensen Huang during a booth visit with Super Micro co-founder and CEO Charles Liang.

Whether that proximity to the center of the AI chip world made the alleged diversion easier — or simply raised the stakes when it unraveled — will be a question for the courts.