Super Micro co-founder engaged in backdoor scheme to divert Nvidia chips to China, U.S. government says

By Emily Bary

Shares of Super Micro fall, though the company itself was not named in the federal indictment that charged Wally Liaw and two others

Super Micro servers were used to illegally transport advanced Nvidia chips to China, a new lawsuit alleges.

The U.S. government has charged a Super Micro co-founder and two other individuals with a "brazen evasion" of export laws meant to prevent advanced U.S. chips from making their way to China.

Federal prosecutors in Manhattan charged Wally Liaw with conspiring to divert to China billions of dollars worth of computer servers that contained heavily controlled Nvidia (NVDA) chips, according to an indictment unsealed on Thursday. The indictment claims that the charged individuals worked with a Southeast Asian company that would order "large allocations" of Super Micro (SMCI) servers and then arrange for their "onward trans-shipment to China."

Liaw and his affiliates engaged in "a tangled web of lies, obfuscation and concealment - all to drive sales and generate revenues in violation of U.S. law," federal prosecutors said in a press release.

While Super Micro wasn't named in the suit or as a defendant, Liaw is a company co-founder, a board member and the vice president of business development. The company has put him and another employee who federal prosecutors charged, Ruei-Tsang Chang, on administrative leave, Super Micro also terminated its relationship with a contractor, Ting-Wei Sun, who federal prosecutors also say participated in a conspiracy that sent sensitive and advanced AI chips to China.

"The conduct by these individuals alleged in the indictment is a contravention of the company's policies and compliance controls, including efforts to circumvent applicable export-control laws and regulations," Super Micro said in a statement.

The company "has been cooperating fully with the government's investigation and will continue to do so," it added in the release.

Super Micro didn't immediately respond to a MarketWatch request for comment. MarketWatch was unable to quickly contact Liaw, Chang or Sun.

An Nvidia spokesperson said in a statement that "strict compliance" is a "top priority" for the company. "Unlawful diversion of controlled U.S. computers to China is a losing proposition across the board - Nvidia does not provide any service or support for such systems, and the enforcement mechanisms are rigorous and effective," the spokesperson said.

The U.S. Attorney's Office didn't immediately respond to MarketWatch's request for comment.

Shares of Super Micro fell 28% in premarket trade on Friday.

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Federal prosecutors said "extensive measures" were used by Liaw and others to keep the "scheme" a secret. These measures included staging "non-working" replicas of the company's servers so that inspectors wouldn't realize the real versions had been unlawfully sent to China, prosecutors claim.

"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," federal prosecutors said.

Chip-making technology has found itself at the heart of a geopolitical battle between the U.S. and China. Semiconductors made by Nvidia and Advanced Micro Devices (AMD) are considered to be the gold standard, and the U.S. has curbed sales to China in part by setting performance restrictions on the chips that U.S. companies are allowed to sell in the country. The most advanced Nvidia chips, for instance, are not permitted by the U.S. government to be sold in China.

See also: Did everyone forget about DeepSeek? What Wall Street is getting wrong about Chinese AI.

"Those regulations reflect a formal determination that the computing capabilities in advanced artificial-intelligence accelerator hardware are of sufficient strategic significance that their transfer to China poses an unacceptable risk to national security," the lawsuit says.

It claims that the Nvidia chips diverted to China through the alleged scheme were those specifically subject to export controls.

-Emily Bary

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