Key Highlights
- Federal authorities have indicted three individuals connected to Super Micro Computer, including company co-founder Yih-Shyan “Wally” Liaw, for orchestrating an illegal export operation of Nvidia-equipped servers to China
- The smuggling operation allegedly diverted approximately $2.5 billion worth of advanced AI hardware, with more than $500 million shipped during a brief period in spring 2025
- The scheme reportedly used decoy servers and fraudulent documentation to circumvent both internal corporate controls and U.S. export enforcement agencies
- Super Micro has suspended two staff members and severed ties with a contractor following notification of the federal charges
- Shares of SMCI plummeted up to 22% during after-hours trading after the criminal indictment became public
Super Micro Computer (SMCI) experienced a dramatic stock decline during after-hours trading Thursday following the unsealing of a federal indictment that accuses three individuals linked to the company of orchestrating a multi-billion dollar smuggling operation to illegally export AI servers to China.
The criminal charges originated from the U.S. Attorney’s Office for the Southern District of New York. Those facing indictment include Yih-Shyan “Wally” Liaw, who co-founded Super Micro and currently serves on its board of directors; Ruei-Tsan “Steven” Chang, who works as a sales manager at the company’s Taiwan operations; and Ting-Wei “Willy” Sun, an independent contractor.
Shares of SMCI tumbled as much as 22% in extended-hours trading following the Manhattan federal court’s release of the indictment documents.
The company has not been charged as a defendant in the case. Super Micro issued a statement confirming it received notification from federal authorities Thursday and has been providing full cooperation with the investigation. The firm has placed both Liaw and Chang on administrative leave while terminating its business arrangement with Sun.
The alleged smuggling network operated through a Southeast Asian intermediary company serving as a cover operation. This front company would take possession of the servers, submit falsified documentation indicating the hardware would remain within the region, then coordinate with a separate shipping company to repackage the equipment in unmarked containers before routing them to mainland China.
The scheme reportedly included using household hair dryers to remove serial number stickers from authentic machines and affixing them to non-functional replicas — referred to in legal documents as “dummy” servers — which were strategically left at warehouses to mislead inspection teams.
Prosecutors allege the defendants deployed these decoy machines during an on-site inspection conducted by a U.S. export control official.
Massive $2.5 Billion Diversion Scheme
The aggregate value of illegally diverted hardware since 2024 totaled roughly $2.5 billion. Authorities claim that between late April 2025 and mid-May 2025 alone, over $510 million in server equipment was illegally shipped to China.
Liaw, whose holdings in Super Micro stock are valued at approximately $464 million based on FactSet data, was taken into custody Thursday. Sun was similarly arrested. Chang remains at large and is considered a fugitive.
Federal prosecutors assert that Liaw actively advocated for upgrading the operation to handle more advanced technology. Text message evidence presented in the indictment shows him inquiring with a contact at the Southeast Asian entity about monthly capacity for Nvidia’s B200 processors — which utilize the Blackwell architecture — beginning in early 2025.
In another digital communication, Liaw allegedly forwarded a link to a White House policy announcement regarding new AI export regulations and suggested accelerating shipment timelines before the rule’s implementation.
When a business associate sent Liaw news coverage about Chinese nationals being apprehended for AI chip smuggling activities, he allegedly responded using crying face emojis.
Nvidia’s Official Statement
Nvidia, whose advanced graphics processing units powered the servers central to this case, emphasized that export regulation compliance ranks among its highest priorities. The chipmaker stated it maintains close collaboration with both customers and government agencies on compliance initiatives.
“Unlawful diversion of controlled U.S. computers to China is a losing proposition across the board,” a Nvidia spokesperson stated, noting the company does not provide service or support for illegally diverted systems.
While the indictment did not specifically identify chip models by name, Nvidia maintains dominant market share in the AI processor sector, and its products have been subject to stringent U.S. export restrictions targeting China since 2022.
In 2024, Super Micro publicly disclosed that Ernst & Young had resigned as its auditing firm. The company subsequently engaged BDO as its new auditor. According to the indictment, Chang had coordinated for what he characterized as a “friendly” auditor to examine data center operations connected to the smuggling scheme.
U.S. Attorney Jay Clayton, appointed by the Trump administration and who previously chaired the SEC, released a statement declaring: “Crimes involving sensitive technology must be met with swift action, otherwise the law is meaningless.”
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