The U.S. is indicting three people, one a U.S. citizen and the other two citizens of the Republic of China, for conspiring to “Secretly Divert Billions of Dollars’ Worth of Servers With Cutting Edge U.S. Artificial Intelligence Technology to China” (Justice Department, March 19, 2026).
“Yih-Shyan Liaw, Ruei-Tsang Chang, and Ting-Wei Sun allegedly defrauded the United States by conspiring to divert significant quantities of servers with advanced artificial intelligence capabilities to Chinese customers,” says one FBI official, James Barnacle.
“These defendants allegedly fabricated documents, staged bogus equipment to pass audit inventories, and used a pass-through company to conceal their misconduct and true clientele list.”
If Justice’s account is accurate, there’s no chance that the defendants accidentally ignored rather than deliberately evaded U.S. export controls.
The scheme operated as follows. Liaw and Chang, who worked closely with third-party brokers with customers based in China, directed certain executives of a company based in Southeast Asia (“Company-1”) to place purchase orders with the U.S. Manufacturer for servers with certain GPUs, purportedly for Company-1. Those servers were often assembled in the United States and shipped to the U.S. Manufacturer’s facilities in Taiwan, then delivered to Company-1 elsewhere in Southeast Asia. Company-1, in consultation with the defendants, then used a shipping and logistics company to repackage the U.S. Manufacturer’s servers and place them in unmarked boxes to conceal their content prior to shipping them to their final destinations in China….
At the defendants’ direction, between 2024 and 2025, Company-1 purchased approximately $2.5 billion worth of servers from the U.S. Manufacturer, many of which were assembled in the United States. The defendants’ scheme became more brazen over time and resulted in massive quantities of servers with controlled U.S. artificial intelligence technology being sent to China. Between late April 2025 and mid-May 2025 alone, at least approximately $510 million worth of the U.S. Manufacturer’s servers, assembled in the United States, were diverted to China in violation of U.S. export control laws as part of the defendants’ scheme….
To deceive the U.S. Manufacturer’s compliance team, responsible for ensuring adherence to U.S. export control laws, the defendants staged thousands of “dummy” servers—non-working, physical replicas of the U.S. Manufacturer’s servers—for inspection at the locations where Company-1 was purportedly storing the servers it had purchased from the U.S. Manufacturer. However, the actual servers purchased by Company-1 from the U.S. Manufacturer had already been unlawfully shipped to China.
As with many long-running scams, the obvious question is why the arrangement was not detected sooner. Could implementing better tracking or other measures make it harder to illegally ship billions in U.S. super-tech to the People’s Republic of China?
