Federal prosecutors unsealed an indictment on Wednesday charging Super Micro Computer’s co-founder and two others with running a $2.5 billion scheme to smuggle Nvidia AI servers to China, evading U.S. export controls through an elaborate system of fake documents and dummy equipment.
Super Micro’s stock fell 33% on Friday.
The Defendants
Yih-Shyan “Wally” Liaw, 71, a Super Micro co-founder who serves as senior vice president of business development and sits on the company’s board, was arrested in California. He faces up to 20 years in prison on the most serious charge.
Ruei-Tsang “Steven” Chang, Super Micro’s Taiwan general manager, remains a fugitive. Ting-Wei “Willy” Sun, 44, a third-party contractor, was also arrested and is being held pending a bail hearing.
How It Worked
The scheme ran from 2024 to 2025, with a particularly brazen three-week period from late April to mid-May 2025 involving roughly $500 million in servers.
According to the indictment, Liaw and Chang directed executives at an unnamed Southeast Asian company to place purchase orders with Super Micro, posing as legitimate buyers. Servers were assembled in the U.S., shipped to Super Micro’s Taiwan facilities, then redirected to the Southeast Asian front company.
From there, prosecutors say, the servers were stripped of identifying labels and serial numbers—using hair dryers to remove stickers—repackaged in unmarked boxes, and shipped to their actual destination: China.
To fool compliance audits, the defendants allegedly placed dummy servers at the Southeast Asian warehouse, creating the appearance of legitimate inventory while real equipment crossed into China.
“Used fabricated documents, staged bogus equipment to pass audit inventories, and used a pass-through company to conceal their misconduct,” FBI Assistant Director James Barnacle said in a statement.
The Company Response
Super Micro emphasized that it is not a defendant in the case and that CEO Charles Liang was not named in the indictment. The company placed Liaw and Chang on administrative leave and terminated its relationship with Sun.
“Supermicro maintains a robust compliance program,” the company said in a statement. It said it is cooperating with the government investigation.
What This Means
The U.S. has restricted exports of advanced AI chips to China since October 2022, trying to prevent Beijing from using the technology for military applications. Nvidia dominates the market for these chips, making them a prime target for smuggling operations.
U.S. Attorney Jay Clayton called such schemes “a direct threat to US national security.”
The case demonstrates both the scale of demand for restricted AI hardware in China and the limits of industry self-policing. Export controls only work if they’re enforced, and enforcement requires companies to actually want compliance—not just the appearance of it.
The indictment also raises questions about what Super Micro’s board knew and when. Liaw wasn’t some junior employee—he co-founded the company and sat on its board while allegedly orchestrating a multi-billion dollar smuggling operation through company facilities.
For the Trump administration, which has oscillated between tough China rhetoric and trade deal ambitions, the case offers a chance to demonstrate enforcement teeth. The Commerce Department has faced criticism for focusing on new rules rather than enforcing existing ones. This prosecution suggests the Justice Department is willing to pursue high-profile targets.
The message to the industry: compliance theater won’t cut it anymore.