U.S. Prosecutors Allege Smuggling of Nvidia Chips to China in New Court Cases

Court records unsealed in March 2026 detail text messages in which a New York marketing executive and his business partner discussed finding ways to move Nvidia GPUs to buyers in China despite U.S. export bans on the advanced chips. In March 2024, Matthew Kelly, 49, of New York, sent a message on the Chinese app WeChat to Stanley Yi Zheng outlining a pitch to potential partners.

Kelly wrote that the business was "lucrative" with millions in profits possible per order and sought contacts who could identify buyers for chips used in AI, cloud computing or bitcoin mining or set up front companies in China. " He told Kelly to delete references to the country because doing so would "draw attention from US government for embargo violation," according to screenshots included in court filings.

Kelly responded that the details had already been shared with others. " Those exchanges form part of allegations that Zheng, Kelly and Tommy Shad English, 53, of Atlanta, conspired to commit smuggling and export control violations. The U.S. government has until June to decide whether to file formal charges.

The case is one of several recent prosecutions and penalties aimed at curbing the flow of American-made semiconductors to countries subject to U.S. export controls. In the past 12 months, the Commerce Department's Bureau of Industry and Security has announced nearly $420 million in combined penalties and forfeitures tied to illegal shipments of semiconductor technology to China.

Federal prosecutors have also charged individuals in schemes involving hundreds of Nvidia GPUs. In one Florida case, authorities alleged that two men created a fake realty company to route 400 Nvidia A100 GPUs to China through Thailand and Malaysia between October 2024 and January 2025.

Law enforcement separately disrupted attempts to ship 10 Hewlett Packard Enterprise supercomputers containing Nvidia H100 GPUs and 50 Nvidia H200 GPUs; the government is seeking forfeiture of the H200 chips.

2026, federal prosecutors arrested Supermicro cofounder Yih-Shyan "Wally" Liaw on charges that he orchestrated a $2.5 billion scheme to divert the company's servers to China through a sham company in Southeast Asia. Liaw, who served as a business development executive and board member, has pleaded not guilty.

Supermicro said neither the company nor its other executives were named in the indictment and that it is conducting an internal investigation. The company disclosed on Tuesday that it received a second subpoena from the Securities and Exchange Commission on April 28, following an earlier one in 2024.

A September 2024 report by the U.S. Senate Permanent Subcommittee on Investigations found that U.S.-made technology has continued to reach Russian weapons systems, often through Chinese smuggling networks, despite export restrictions imposed after Russia's 2022 invasion of Ukraine.

An analysis by Ukraine's National Agency for Corruption Prevention identified 2,797 foreign components in Russian weapons, 72 percent of which originated in the United States. Those components appeared in systems such as Kh-101 cruise missiles. From January to October 2023, Russia imported $8.8 billion in materials needed for military production while China imported $349.4 billion in semiconductors during 2023.

A civil lawsuit in Texas brought by Ukrainian citizens against several U.S. semiconductor companies is scheduled for oral arguments next week on a motion to dismiss. The suit names Texas Instruments, AMD, Intel and Mouser Electronics. The companies argue they did not make the sales in question.

A spokesperson for Mouser said the company denies the allegations and is committed to complying with export controls. Greg Thomas, chief executive of ChainSentry, which monitors gray-market semiconductor supply chains, said export controls have created artificial scarcity that makes advanced chips attractive to smugglers.

"The money is just too good," Thomas said. He added that the industry's compliance culture has not fully adjusted to tightened national security restrictions that began after Russia's invasion of Ukraine in February 2022.