A Chinese national and two American citizens have been charged with conspiring to smuggle restricted artificial intelligence (AI) chips into China through Thailand, the U.S. Department of Justice announced March 25.
Federal prosecutors say the three defendants allegedly sought to buy millions of dollars’ worth of export-controlled computer chips from a California-based computer hardware company for shipment without getting export licenses.
Stanley Yi Zheng, 56, of Hong Kong, China, was arrested on March 22, and was being held in federal custody without bail pending trial.
Matthew Kelly, 49, of Hopewell Junction, New York, and Tommy Shad English, 53, of Atlanta, Georgia, surrendered to authorities on March 25. They were scheduled for their initial appearances in court later in the day.
Jason Sargenski, special agent-in-charge of the Department of Defense Office of Inspector General’s defense criminal investigative service, southeast field office, said protecting sensitive defense technology from foreign adversaries was a top priority.
“Advanced computing technologies, like Graphics Processing Units (GPUs), play a critical role in military artificial intelligence and national defense capabilities,” Sargenski said. “When individuals attempt to illegally acquire or export this technology for profit, they are putting national security and our warfighters at risk.”
Federal authorities allege Zheng, Kelly, and English began conspiring together around May 2023 when they illegally tried to obtain computer servers with export-controlled computer chips from a California-based computer hardware company and ship them to Thailand with an ultimate destination in China.
The three allegedly used the names of Thailand-based companies as the purchasers of the computer servers, even though the servers were intended to be diverted to China, according to federal authorities.
In October 2023, English allegedly acted on behalf of a Thailand-based company by ordering 750 computer servers for about $170 million from the California company. Six hundred of the computers contained a chip that was controlled on a special U.S. Commerce control list that required a license to export them to China.
In placing the order, English allegedly signed a notice certifying that the computer servers were not destined for China or any other country subject to heightened export requirements.
Prosecutors allege that in January 2024, English transferred over $20 million to the California company as a partial payment for the 2023 order.
The October 2023 order was not completed, however, after a second company tried to verify if the end user was in Thailand, according to court documents.
English then allegedly tried to order another 500 computer servers in April 2024 that contained export-controlled chips and signed a notice that the servers were for a Thailand-based company. That deal also fell through.
Text messages and emails among the three defendants during the sales transactions led federal authorities to believe the servers were headed to China.