U.S. authorities shut down major China-linked AI tech smuggling network

HOUSTON - Two businessmen are now in custody for allegedly violating U.S. export control laws, announced U.S. Attorney Nicholas J. Ganjei.

As part of the overall investigation, a Houston company and its owner have also pleaded guilty to smuggling cutting-edge Artificial Intelligence technology out of the United States.

"Operation Gatekeeper has exposed a sophisticated smuggling network that threatens our Nation's security by funneling cutting-edge AI technology to those who would use it against American interests," said Ganjei. "These chips are the building blocks of AI superiority and are integral to modern military applications. The country that controls these chips will control AI technology; the country that controls AI technology will control the future. The Southern District of Texas will aggressively prosecute anyone who attempts to compromise America's technological edge."

"The United States has long emphasized the importance of innovation and is responsible for an incredible amount of cutting-edge technology, such as the advanced computer chips that make modern AI possible," said Assistant Attorney General for National Security John A. Eisenberg. "This advantage isn't free but rather the result of our engineers' and scientists' hard work and sacrifice. The National Security Division, along with our partners, will vigorously enforce our export-control laws and protect this edge."

Alan Hao Hsu aka Haochun Hsu, 43, Missouri City, and his company, Hao Global LLC, both pleaded guilty to smuggling and unlawful export activities Oct. 10.

According to now unsealed court documents, between October 2024 and May 2025, Hsu and others knowingly exported and attempted to export at least $160 million worth of export-controlled Nvidia H100 and H200 Tensor Core graphic processing units (GPUs).

The H100 and H200 are high-speed GPUs used for AI applications and high-performance computing. They are designed to process massive amounts of data, advancing generative AI and large language models, and accelerating scientific computing. The GPUs are used for both civilian and military applications. These chips are among the most advanced GPUs ever developed, and their export to the People's Republic of China is strictly prohibited.

Hsu and others falsified shipping paperwork, misclassifying the true nature of the goods and their recipients to conceal the ultimate destination of the GPUs. Hsu and Hao Global received more than $50 million in wire transfers that originated from the People's Republic of China to help fund the scheme. The GPUs were ultimately shipped to the PRC, Hong Kong and other destinations in violation of U.S. export laws.

Also charged in relation to the scheme are two PRC natives - Fanyue Gong aka Tom Gong, 43, a PRC citizen who resides in Brooklyn, New York, and Benlin Yuan, 58, a Canadian citizen who resides in Mississauga, Ontario. Law enforcement arrested Gong in New York Dec. 3, and Yuan in Sterling, Virgina, Nov. 28.

Yuan is the CEO of a Sterling, Virginia, IT services company which is the U.S. subsidiary of a large PRC IT company based in Beijing, while Gong is the owner of a New York technology company.

According to their charges, Gong and Yuan also independently conspired with employees of a Hong Kong-based logistics company and a China-based AI technology company to circumvent U.S. export controls.

The criminal complaint against Gong alleges co-conspirators obtained Nvidia GPUs through straw purchasers and intermediaries, falsely indicating that the goods were for U.S. customers or customers in third countries that do not require a license to export. The GPUs were shipped to multiple U.S. warehouses where individuals who worked for Gong removed Nvidia labels and re-labelled the GPUs with the name "SANDKYAN" - a fake company - and then prepared the goods for export at his direction, according to the charges. The shipping and export paperwork for the GPUs allegedly misclassified the goods as generic computer parts. The charges allege co-conspirators then shipped the goods or attempted to do so to the PRC and Hong Kong in violation of U.S. laws.

According to Yuan's charges, he helped recruit and organize individuals to inspect the mislabeled GPUs on behalf of the Hong Kong logistics company. Yuan allegedly agreed to direct inspectors not to say the goods were destined for the PRC. The charges also allege Yuan directed discussions regarding crafting a story his company could use to get GPUs and other equipment released after federal law authorities detained it. Yuan allegedly engaged in several conversations about providing false information to U.S. authorities regarding the ultimate customer of the goods.

Yuan is also alleged to have participated in and agreed to direct actions involving the handling and storage of another export of Nvidia GPUs on behalf of the Hong Kong logistics company.

Hsu faces up to 10 years in federal prison at sentencing Feb. 18, while Hao Global LLC could be fined up to twice the gross gain from the offense and given a term of probation.

If convicted, Yuan faces up to 20 years for conspiracy to violate the Export Control Reform Act. Gong is charged with conspiracy to smuggle goods from the United States and faces a maximum of 10 years.

Hsu was permitted to remain on bond pending sentencing. Yuan and Gong are currently in custody pending further criminal proceedings.

The Department of Commerce's Bureau of Industry and Security - Office of Export Enforcement (Dallas Field Office), Immigration and Customs Enforcement's Homeland Security Investigations - Dallas and FBI Field Offices in New York City and Washington D.C. conducted the investigation. Assistant U.S. Attorneys John Marck and Mark McIntyre are prosecuting the case along with Trial Attorneys Fatema Merchant and Yifei Zheng of DOJ's National Security Division's Counterintelligence and Export Control Section.

A criminal complaint is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless convicted through due process of law.