Super Micro Computer (SMCI) shares experienced a significant drop in after-hours trading on Thursday, following the unsealing of a federal indictment accusing three individuals with ties to the company of orchestrating a multi-billion dollar smuggling operation involving AI servers destined for China.
The criminal charges were brought forth by the U.S. Attorney's Office for the Southern District of New York. The three individuals indicted are Yih-Shyan “Wally” Liaw, a co-founder and board member of Super Micro; Ruei-Tsan “Steven” Chang, a sales manager at the company's Taiwan branch; and Ting-Wei “Willy” Sun, an independent contractor.
The alleged smuggling network operated under the guise of a front company based in Southeast Asia. This shell entity would receive the servers, submit falsified documents claiming the hardware would remain in the region, and then utilize another logistics provider to repackage the equipment in unmarked containers for final shipment to China.
The scheme reportedly even involved using hair dryers to remove serial number labels from genuine machines and affixing them to non-functional counterfeit units—referred to as "decoy" servers in the indictment—which were deliberately placed in warehouse facilities to mislead investigators.
Prosecutors allege that the defendants even employed these decoy devices during an inspection by a U.S. export control official.
Multi-Billion Dollar Transfer Scheme
The total value of the technology products transferred since 2024 is estimated to be approximately $2.5 billion. In a specific period between late April and mid-May 2025 alone, over $510 million worth of server equipment was allegedly shipped to China.
According to prosecutors, Liaw actively pushed to escalate the operation to include more advanced hardware. Text message exchanges cited in the indictment show him inquiring with a contact at the Southeast Asian front company about the monthly supply capacity for Nvidia's B200 chips utilizing the Blackwell architecture, starting from early 2025.
In another message, Liaw allegedly forwarded a link to a White House statement regarding upcoming AI export regulations, suggesting an acceleration of shipments before the policy took effect.
When a middleman shared a link about the arrest of a Chinese national for AI chip smuggling activities, Liaw reportedly responded with crying emojis.
Nvidia Statement
A spokesperson for Nvidia stated: "The illicit transfer of regulated U.S. computer equipment to China is counterproductive, and the company does not provide any services or support for such systems."
While the indictment does not specify particular chip models, Nvidia dominates the AI chip market, and its products have been subject to stringent U.S. export restrictions to China since 2022.
In 2024, Super Micro disclosed that its auditor, EY, had resigned.