U.S. Feds Dismantle $160M Nvidia AI Chip Smuggling Ring, Seize Over $50M

Federal law enforcement has dismantled a sophisticated international smuggling operation that illegally exported over $160 million in advanced Nvidia artificial intelligence processors to China and restricted destinations. The investigation, dubbed “Operation Gatekeeper,” resulted in multiple arrests, guilty pleas, and seizures exceeding $50 million in graphics processing units and cash, representing a major enforcement victory in protecting America’s technological advantage in AI development and military applications.

The Primary Defendants and Their Roles

The conspiracy involved three primary defendants coordinating across multiple countries. Alan Hao Hsu, 43, from Missouri City, Texas, pleaded guilty on October 10, 2025, to smuggling and illegal export charges. Between October 2024 and May 2025, Hsu and associates exported or attempted to export Nvidia H100 and H200 Tensor Core GPUs worth at least $160 million, receiving over $50 million in wire transfers from China to finance the scheme. He faces up to 10 years in federal prison at sentencing scheduled for February 18, 2026.

Fanyue Gong, 43, a Chinese citizen residing in Brooklyn, allegedly owned a technology company used to circumvent U.S. export controls. According to charges, Gong and co-conspirators used straw purchasers and intermediaries to acquire GPUs while falsely claiming end-users were in the United States or permitted third countries. Workers allegedly removed original Nvidia labels from chips in U.S. warehouses and relabeled them with “SANDKYAN,” a fictitious company name. Gong faces up to 10 years in prison if convicted.

Benlin Yuan, 58, a Canadian citizen living in Mississauga, Ontario, and CEO of a Sterling, Virginia-based technology services company, allegedly recruited inspectors to conceal Chinese destinations and prepare falsified paperwork. Yuan faces up to 20 years in federal prison, the longest potential sentence among the defendants.

Concealment Methods and Financial Schemes

The smuggling network employed elaborate tactics to evade U.S. authorities. Workers systematically removed authentic Nvidia packaging and relabeled thousands of GPUs with the fake company name. Shipping documents falsely classified advanced processors as generic computer parts rather than restricted AI hardware. The conspiracy fabricated contracts and shipping records indicating GPUs were destined for legitimate American customers or permitted third countries like Malaysia and Thailand, while actual destinations were China, Hong Kong, and other restricted locations.

To disguise funding, Hsu and associates received payments through bank accounts in Thailand, Malaysia, and Singapore rather than direct transfers from Chinese entities. This geographic dispersal made tracing the conspiracy more challenging for investigators. The network coordinated with Hong Kong-based logistics companies and Beijing-based technology firms to layer international transactions and obscure ownership chains.

Strategic Importance and Broader Enforcement

The Nvidia H100 and H200 Tensor Core GPUs represent some of the world’s most advanced artificial intelligence accelerators designed for massive data processing and machine learning applications. These processors remain on the U.S. restricted list and cannot legally ship to China without special federal authorization. Law enforcement officials stressed that these processors have dual-use applications extending into military capabilities, weapons development, drone operations, and intelligence analysis.

Federal investigators seized more than $50 million worth of Nvidia GPU equipment destined for Chinese locations through multiple interception points, including facilities in Atlanta and Mississauga, Ontario. Operation Gatekeeper represents only one of several recent enforcement actions targeting illegal Nvidia chip exports, demonstrating that sophisticated actors continue circumventing regulations using false documentation and international logistics networks despite strict export controls. The Justice Department’s commitment to deterring future attempts reflects the intense technological competition between nations for artificial intelligence leadership.