The US Department of Justice on Thursday unsealed an indictment charging three people with running one of the largest known AI chip smuggling operations in history — with Super Micro Computer's co-founder at its center.

The Charges

Yih-Shyan "Wally" Liaw, 71, who co-founded Supermicro in 1993 and sits on its board, was arrested Thursday. Also charged were Ruei-Tsang "Steven" Chang, Supermicro's Taiwan general manager (currently a fugitive), and third-party contractor Ting-Wei "Willy" Sun, who was also taken into custody. All three face charges of conspiring to violate the Export Control Reform Act, smuggling goods from the US, and conspiring to defraud the United States.

The Operation

The DOJ alleges the scheme funneled roughly $2.5 billion in Supermicro servers packed with Nvidia GPUs to China between 2024 and 2025. A Southeast Asian company acted as a front buyer: orders were placed as if the servers would remain in Southeast Asia, but the hardware was quietly forwarded to China.

To fool auditors, the defendants allegedly staged fake "dummy" servers — complete with serial number labels removed and reapplied using hair dryers — at the warehouse, while the real machines were already in China. The same dummy hardware was used to pass an on-site US Commerce Department audit. Encrypted messaging apps coordinated the operation throughout.

The Fallout

Supermicro placed all named employees on leave and ended its relationship with the contractor. Shares of $SMCI fell 33% on Friday after the indictment was unsealed. Liaw controls approximately $464 million in SMCI shares. Nvidia said compliance is a "top priority" and that it cooperates closely with government enforcement.

The charges represent the US government's most high-profile crackdown yet on alleged AI chip diversion to China.