The US Justice Department on Monday announced the arrest of two Chinese businessmen for orchestrating a sophisticated scheme to smuggle high-performance Nvidia AI chips to China.
This is as President Trump reverses a Biden-era policy that will now allow China to import the Nvidia H200 AI chip from the US.
The bust was part of "Operation Gatekeeper," which seized more than $50 million in advanced GPUs destined for China and other restricted locations.
The two suspects, 43-year-old Fanyue Gong, a Chinese citizen living in Brooklyn under “Tom Gong,” and 58-year-old Benlin Yuan, a Canadian national originally from China, were arrested in the US (New York and Virginia) last week.
Gong was said to own a New York technology company, while Yaun was the CEO of a Virginia-based IT services company, also a subsidiary of a company based in the People's Republic of China (PRC).
According to court filings, the duo acquired Nvidia H100 and H200 GPUs through intermediaries and straw purchasers, and falsified information about the chips' ultimate destination.
The two PRC natives were found conspiring with another suspect, 43-year-old Chinese national Alan Hao Hsu and his Houston-based company, Hao Global LLC, to carry out the complex scheme.
Hsu was arrested and pleaded guilty in October to smuggling and unlawful export activities connected to the same network, the DoJ said.
Gong and Yaun are also accused of conspiring with employees of a Hong Kong logistics company and a China-based AI technology firm to circumvent US export controls, the DoJ states.
Nvidia labels replaced with fake labels
Prosecutors say the scheme ran from late 2024 to mid-2025 and involved at least $160 million worth of export-controlled GPUs. Wire transfers exceeding $50 million from China were reportedly used to fund the operations.
The GPUs, designed for advanced AI and high-performance computing applications, were reportedly shipped to US warehouses where workers removed Nvidia labels and replaced them with tags referencing a fake company, “SANDKYAN.”
The chips were then prepared for export to China and Hong Kong, prosecutors say. Yuan additionally coordinated inspections to obscure the chips’ true destination, the criminal complaint alleges.
“The sophisticated smuggling network exposed by Operation Gatekeeper threatens US national security by funneling cutting-edge AI technology to actors who could leverage it against American interests,” said US Attorney Nicholas Ganjei for the Southern District of Texas.
“Control over these chips is control over AI innovation, which has profound implications for economic and military power,” Ganjei said.
Nvidia’s H100 and H200 GPUs are capable of processing massive data volumes and accelerating generative AI, large language models, and scientific computing tasks critical to both civilian and military applications.
Their advanced capabilities place them under the US Export Control Reform Act (ECRA), designed to prevent foreign adversaries from obtaining cutting-edge US technology.
“Adversaries are seeking every opportunity to acquire advanced AI technology, and the US must continue to defend its technological advantage,” said Assistant Director Roman Rozhavsky of the FBI’s Counterintelligence Division.
US greenlights China importing Nvidia H200 chips
The DOJ takedown coincides with Trump’s policy shift, allowing Nvidia to export the H200 chips to approved customers in China, reversing restrictions imposed during the Biden administration over national security concerns.
The new policy, still being finalized by the Commerce Department, is expected to extend to other US chipmakers, including AMD and Intel. Trump described the new policy changes as necessary to support American jobs and manufacturing while maintaining national security safeguards.
Still, analysts warn that even tightly regulated exports can be exploited through straw purchases and mislabeling, as demonstrated in this case.
If convicted, Gong faces up to 10 years in prison for conspiring to smuggle goods, while Yuan faces up to 20 years in prison for violating the ECRA, along with potential fines. Also facing 10 years in prison, Hsu is scheduled for sentencing in February.
Last month, the feds busted up a smaller Nvidia H200 and H100 chip smuggling scheme worth about $4 million, leading to the arrest of two American citizens and two Chinese nationals.
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