Three Charged in $170 Million Scheme to Smuggle U.S. AI Technology to China
A significant breach of U.S. export law has come to light, involving a $170 million order for 750 servers and 600 restricted Nvidia chips. Federal prosecutors allege that three individuals conspired to illegally route advanced artificial intelligence technology to China, utilizing a Thailand-based front company to mask their intentions. This case underscores the ongoing challenges in safeguarding sensitive technology amid escalating geopolitical tensions.
The Charges and Arrests
On March 22, 2024, Stanley Yi Zheng, 56, a resident of Hong Kong, was arrested, followed by the surrender of Matthew Kelly, 49, from Hopewell Junction, New York, and Tommy Shad English, 53, of Atlanta, Georgia, on March 25. The Justice Department has charged all three with conspiracy to commit smuggling and violations of export control laws. The defendants allegedly sought millions of dollars’ worth of export-controlled computer chips from a California-based hardware manufacturer for illegal shipment to China via Thailand.
The criminal complaint details attempts to smuggle Nvidia A100 and H100 chips, which are critical for large-scale AI model training and inference. The scheme targeted a hardware and services company in San Jose, with a purchase order amounting to nearly $62 million for server units equipped to support Nvidia’s advanced GPUs.
Technical Relevance of Nvidia Chips
Nvidia’s H100 and A100 chips are subject to stringent U.S. Commerce Department export controls due to their applications in military AI, autonomous weapons systems, and the development of sophisticated large language models. These technologies are integral to modern AI systems, including those that bolster China’s rapidly advancing military AI capabilities.
According to publicly available reporting, the conspiracy began in May 2023, when Zheng, Kelly, and English initiated their collaboration to procure computer servers from the California manufacturer, intending to ship them to Thailand with the ultimate destination being China. They misrepresented the transaction by using the names of Thailand-based companies as the purported purchasers, while their actual goal was to divert U.S.-origin AI chips to China.
Unraveling the Scheme
In October 2023, English, acting on behalf of a Thailand-based company, placed an order for 750 computer servers valued at approximately $170 million. Notably, 600 of these servers contained chips listed on the U.S. Commerce Control List, which require a license for export to China.
The scheme began to unravel in January 2024 when English, in an email regarding a compliance review of the October order, requested the manufacturer to include Zheng and Kelly in the correspondence. This raised red flags for the manufacturer, who noted that Zheng’s company was based in China and found it unusual that no representatives from the Thailand-based company were included in the email thread. The manufacturer also highlighted that China is an embargoed country, restricting U.S. companies from selling to businesses or end users located there.
A tip-off to federal investigators in January 2024 further escalated the situation. In February 2026, federal agents seized the phone and laptop of Matthew Kelly upon his return to the U.S. from Italy, gaining access to WhatsApp messages exchanged among the three suspects.
Investigative Insights
Employees from Nvidia and Supermicro detected irregularities in the order requests, leading to their cancellation in early 2024. The use of Thailand as a transshipment point—a tactic designed to obscure the final destination—has become increasingly common since the Biden administration imposed expanded export controls on advanced chips in October 2022 and October 2023.
Prosecutors assert that the AI chips targeted for smuggling possess military and strategic applications, making their unauthorized transfer a violation of U.S. export control laws. The A100 and H100 chips, in particular, can facilitate the training of AI models necessary for advanced weapon targeting, signals intelligence analysis, and autonomous systems—capabilities that the U.S. government aims to restrict from China’s military.
Broader Implications
The ongoing competition between the U.S. and China for global AI dominance is underscored by this case. A recent advisory from a U.S. body warned that China’s advancements in open-source AI could jeopardize America’s leading position in the field. The charges come at a time when the Department of Justice has intensified its enforcement of semiconductor export controls, recognizing that chip smuggling poses a direct threat to U.S. national security by potentially closing the AI capability gap that export restrictions are designed to maintain.
The investigation is being conducted by the Department of Commerce’s Bureau of Industry and Security, the Defense Criminal Investigative Service, and Homeland Security Investigations. Each defendant faces serious charges, including conspiracy to commit smuggling and conspiracy to violate the Export Control Reform Act, which could result in combined sentences exceeding 20 years.
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