Inside the $28 Million AI Chip Smuggling Ring That Fooled U.S. Export Controls

Twenty days. That's how long Chuan Geng and Shiwei Yang waited after the U.S. banned advanced chip exports to China before starting their smuggling operation.

The two Chinese nationals, both 28 and living in Southern California, now face 20 years in federal prison for shipping tens of millions of dollars worth of Nvidia's most powerful AI chips to China through a network of fake companies and freight forwarders. Federal agents arrested them last week after finding text messages on their phones discussing how to check shipments for trackers while evading export laws.

Their company, ALX Solutions Inc., opened shop in El Monte, California, in October 2022—right after the Biden administration blocked China from buying the semiconductors that power artificial intelligence. From then until July 2025, Geng and Yang built what prosecutors call a sophisticated pipeline for getting restricted technology to China while pretending the chips never left Southeast Asia.

The $208,000-Per-Chip Business Model

The scheme centered on Nvidia's H100 graphics processing units—chips with 80 billion transistors that were, until recently, the most powerful GPUs on the market. At $208,000 each, these chips train the language models behind ChatGPT-style AI and power self-driving cars and medical diagnosis systems. China wants them badly. The U.S. wants to keep them away from China even more badly.

Here's how ALX Solutions worked around that problem. They'd buy hundreds of H100s from suppliers like San Jose-based Super Micro Computer, claiming the end users were in Singapore or Japan. They'd label shipments as generic "computer parts" to avoid customs scrutiny. Then they'd send everything to freight forwarders in Malaysia and Singapore—common transshipment points for goods heading to China.

The money trail gave them away. ALX Solutions never received payments from the Singapore and Malaysian companies they claimed were buying the chips. Instead, the money came from businesses in Hong Kong and China. One Chinese company wired them $1 million in January 2024 alone.

When Your CEO Texts About "F.... US Trump Administration"

Federal agents searched ALX's office last week and seized Geng and Yang's phones. What they found was better than any surveillance footage: the defendants discussing their crimes in writing.

The most damaging exchange involves Yang and ALX's CEO—a third Chinese national who remains unidentified and at large. The CEO instructs Yang to disassemble an H200 server and ship it to Malaysia for forwarding to China. Then comes the paranoid kicker: "Pay attention to see if there is a tracker on it. You must look carefully. F..... US Trump administration, who knows what they will do."

The Trump administration is now actually exploring ways to add location trackers to AI chips to enforce export controls. The CEO's paranoia was both justified and self-defeating—worrying about trackers in texts that would become evidence.

The sloppiness didn't stop there. In one $28 million order, ALX claimed the customer was a Singapore company. When U.S. export control officers in Singapore investigated, they found two problems: the company didn't exist at the listed address, and the chips never arrived in Singapore anyway.

The Numbers Tell the Story

Between August 2023 and July 2024, ALX bought over 200 Nvidia H100 chips through Super Micro Computer alone. Add in the PNY GeForce RTX 4090 graphics cards and other restricted technology, and prosecutors tracked more than 20 illegal shipments over nearly three years.

Each shipment followed the same pattern. ALX would declare false end users in Singapore, Japan, or Malaysia. The products would ship to freight forwarders who'd send them to China. Payments would flow back from Chinese companies, not the supposed customers. Rinse and repeat.

The scheme might have continued if not for those seized phones and the digital breadcrumbs they contained. Communications about evading export laws. Instructions for checking for trackers. False labeling of shipments. Everything prosecutors needed was there.

What Happens Next

Geng, a legal permanent resident, posted $250,000 bond after his court appearance Monday. Yang, who overstayed her visa, has a detention hearing scheduled for August 12. Neither has entered a plea yet. Both face charges under the Export Control Reform Act.

The arrests send a message, but they won't stop the game. Where there's demand this strong and profit margins this fat, someone will always try to fill the gap. China needs these chips to compete in AI. The U.S. needs to keep them away to maintain its technological edge.

The Commerce Department's Bureau of Industry and Security and the FBI continue investigating. They're probably looking for that third person, the CEO who's still out there somewhere, hopefully not texting about trackers anymore.

Why this matters:

• Export controls only work when smugglers document their own crimes in text messages—most operations probably run quieter than this one

• The massive price gap between legal and black market AI chips creates an economic incentive that won't disappear with a few arrests