On 8 December 2025, the U.S. Department of Justice (DoJ) announced the dismantling of a large-scale smuggling network — dubbed Operation Gatekeeper — that funneled export-controlled Nvidia H100 and H200 AI chips to China and other restricted destinations. Prosecutors say the scheme involved at least US$160 million worth of GPUs, and resulted in arrests of multiple individuals.

🔍 What Happened?

  • According to unsealed court documents, between October 2024 and May 2025, a network spanning U.S. companies, warehouses, logistics providers and overseas front firms attempted to export advanced Nvidia GPUs — designed for high-performance AI computation — to the People’s Republic of China (PRC) and Hong Kong.

  • In the most recent action, two individuals, Fanyue Gong (aka “Tom Gong,” residing in New York) and Benlin Yuan (a Canadian national originally from China, based in Virginia), were taken into custody. Prosecutors say they conspired with a Hong-Kong logistics firm and a China-based AI firm to disguise the true destination of the chips.

  • Earlier, another key player, Alan Hao Hsu, and his company — Hao Global LLC — pleaded guilty on October 10, 2025. Court filings claim Hsu and his co-conspirators routed at least $160 million worth of GPU exports, using straw purchasers and falsified documents.

  • 🧠 The Smuggling Method: Labeling Bills and Straw Purchases

  • Prosecutors say the network obtained Nvidia GPUs through front companies and straw purchasers — individuals or entities who falsely declared themselves as legitimate buyers.

  • Once the GPUs were inside the U.S. supply chain, the defendants allegedly removed the genuine Nvidia labels and replaced them with fake labels bearing the name of a fictitious company, SANDKYAN. According to criminal complaints, the shipments were then re-packaged and re-documented as “generic computer parts” before being shipped abroad.

  • The export paperwork misclassified both the nature of the goods and their ultimate destination, concealing the fact they were going to China/Hong Kong — in direct violation of U.S. export control laws.

⚠️ National Security Implications

The GPUs involved — Nvidia H100 and H200 — are extremely powerful processors used for advanced AI workloads, large-scale data processing, generative AI, and high-performance computing. These chips have both civilian and potential military applications. The DoJ, in its statement, underscored that access to these chips equates to “control over AI innovation,” which has significant implications for national security and technological dominance.

According to prosecutors, such smuggling undermines U.S. efforts to maintain its strategic edge in AI and could enable foreign actors to accelerate development of advanced computing capabilities — possibly including military, intelligence, or surveillance applications.

💡 Timing: Coincides with Export Policy Shift

The bust comes at a sensitive time. The arrests were announced almost simultaneously with recent policy changes under Donald Trump’s administration, which have partially relaxed previous restrictions and permitted controlled export of Nvidia H200 chips to certain approved customers in China. Investing.com+2Reuters+2

The juxtaposition highlights that — even with legal channels re-opened — illicit trade and smuggling networks may seek to exploit confusion, loopholes, or weak oversight to continue funneling restricted tech abroad. As the DoJ makes clear, enforcement remains a top priority. Department of Justice+2Houston Chronicle+2

✅ Significance for Cybersecurity & Export-Control Enforcement

  • The case represents the largest publicly disclosed smuggling bust involving AI-grade GPUs so far, with an estimated $160 million in contraband hardware. Houston Chronicle+2Department of Justice+2

  • It reveals how deep and sophisticated these smuggling operations have become: using straw purchases, shell companies, fraudulent labeling, and trans-shipment logistics to circumvent export laws. Investing.com+2The Straits Times+2

  • For cybersecurity and export-control stakeholders, the case underscores the need for continuous vigilance, due diligence, and robust compliance mechanisms — especially as the global demand for AI hardware surges and trade policies evolve.

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