Federal authorities have shut down what they describe as a sophisticated, China-linked smuggling network that illegally funneled cutting-edge AI processors out of the United States, according to newly unsealed court documents and a Justice Department announcement. The investigation—dubbed Operation Gatekeeper—has resulted in two arrests, one guilty plea, and the seizure of more than $50 million in Nvidia technology and cash.
Alan Hao Hsu, 43, of Missouri City, Texas, and his company, Hao Global LLC, pleaded guilty in October to smuggling and unlawful export activities involving high-performance Nvidia H100 and H200 Tensor Core GPUs, prosecutors said. Hsu admitted to exporting or attempting to export at least $160 million worth of the restricted chips between October 2024 and May 2025 by falsifying shipping documents and concealing their true destination. He and the company received more than $50 million in wire transfers from China to finance the scheme, according to the plea.
The GPUs—among the most advanced processors used for artificial intelligence, scientific computing, and military applications—were ultimately shipped to China, Hong Kong, and other restricted destinations in violation of U.S. export control laws. Hsu faces up to 10 years in prison at his Feb. 18 sentencing, while his company faces fines up to twice the gross gain from the offense.
Federal prosecutors said Hsu’s operation was part of a broader trafficking network that routed GPUs through straw buyers, shell companies, and U.S. warehouses, where labels were removed and replaced with counterfeit branding before being shipped overseas.
Two Additional Defendants Arrested
The Justice Department has also charged two Chinese nationals living in North America in connection with the network.
Benlin Yuan, 58, the CEO of a Sterling, Va.–based subsidiary of a large Beijing IT firm, was arrested Nov. 28 and charged with conspiring to violate the Export Control Reform Act. Prosecutors allege Yuan worked with a Hong Kong logistics company to mislabel GPU shipments, coach inspectors to conceal their true destination, and craft false explanations to provide federal authorities when shipments were detained.
Fanyue “Tom” Gong, 43, a Brooklyn-based tech company owner, was arrested Dec. 3 and charged with conspiring to smuggle goods out of the United States. According to a criminal complaint, Gong’s associates acquired GPUs through intermediaries while falsely claiming they were for lawful domestic use. Workers allegedly removed Nvidia labels, rebranded the chips with the name “SANDKYAN,” and misclassified the goods as generic computer parts in export paperwork before attempting to ship them to China and Hong Kong.
Both men remain in custody pending further proceedings. If convicted, Yuan faces up to 20 years in prison and a $1 million fine; Gong faces up to 10 years.
Officials Warn of Rising National Security Threat
Justice Department officials described the alleged scheme as a direct threat to national security.
“These chips are the building blocks of AI superiority and are integral to modern military applications,” said U.S. Attorney Nicholas Ganjei of the Southern District of Texas. “The country that controls these chips will control AI technology; the country that controls AI technology will control the future.”
Assistant Attorney General for National Security John Eisenberg said the case underscores the importance of export controls. “This advantage isn’t free but rather the result of our engineers’ and scientists’ hard work and sacrifice,” he said.
The FBI’s Counterintelligence Division also urged increased vigilance from U.S. technology firms. Assistant Director Roman Rozhavsky said adversaries “try to match U.S. artificial intelligence breakthroughs,” warning that enforcement partnerships remain essential.
Authorities emphasized that the charges against Gong and Yuan remain allegations and that all defendants are presumed innocent unless proven guilty in court.
