Federal prosecutors have arrested Greg Lui, the 38-year-old CEO of California-based Earthmade Computer, accusing him of running a smuggling operation that diverted more than $300 million in servers carrying export-controlled Nvidia AI chips to China, the Department of Justice announced Thursday.
According to the indictment, Lui used false end-user paperwork to disguise shipments of high-end servers that he allegedly knew were ultimately destined for China. Ars Technica reports that Lui conspired with freight-forwarding firms in Malaysia and Singapore to illegally reroute shipments of Nvidia A100 and H100 GPUs, chips that remain subject to US export controls because they are capable of training large language models at a scale that worries US national security officials. For more context on this story, see our ongoing latest AI developments.
The case is one of the most significant enforcement actions to emerge from Washington's effort to keep advanced AI hardware out of China, and it shows how deeply the gray market for AI compute has penetrated the legitimate US technology supply chain.
How the Alleged Scheme Worked
Court records cited by the Department of Justice indicate the scheme ran from October 2023 through August 2026 — nearly three years of shipments moving through commercial channels. One key piece of evidence is a 2024 email discussing an order for 70 servers with export-restricted GPUs that were fraudulently declared as bound for Malaysia. Prosecutors allege that after Lui submitted a purchase order to a US manufacturer for 27 of those servers, valued at approximately $7.6 million, a co-conspirator told a Malaysian government official that all 27 had actually been shipped to China.
A separate shipment of 92 export-controlled servers was allegedly routed through Singapore to Malaysia, then on to Hong Kong, before ending up at a Chinese firm based in Hangzhou, a city the Wall Street Journal has described as China's AI hub.
In another 2024 shipment, prosecutors say Lui sent 100 servers containing Nvidia H100 GPUs worth more than $22 million under fraudulent documentation from a fake buyer whose CEO was identified as "Jackie Lui." The FBI alleges that three years earlier, Lui had purchased the identifying documents of a real individual, known to the grand jury, and used that identity to conduct business transactions in furtherance of the export-evasion scheme.
The paper trail, according to prosecutors, was the scheme's undoing. Emails and bank records exposed the operation, with payment records from Lui's accounts at Bank of America and JP Morgan cited among the evidence.
Charges, Penalties and Forfeiture
Lui faces three counts: conspiracy to violate the Export Control Reform Act and the Export Administration Regulations, federal smuggling, and money laundering. The conspiracy and money laundering charges each carry a maximum sentence of 20 years in prison, while the smuggling charge carries up to 10 years.
Financial records were central to the case. Prosecutors allege Lui's firm received more than $176 million from the scheme in 2024 alone. The Justice Department is seeking forfeiture of all proceeds tied to the alleged operation.
Nvidia: 'A Drop in the Bucket'
The arrest lands amid heightened scrutiny of how US-made AI hardware reaches China despite export controls. A Nvidia spokesperson told Bloomberg on Thursday that "less than one half of one percent" of Nvidia products have been diverted to China, adding that "governments and media have found insignificant diversion of controlled US products — a drop in the bucket compared to the ocean of domestic compute China already has."
That framing reflects a shift in the company's posture. Ars Technica notes that after an Nvidia senior manager in Taiwan was linked to a smuggling scheme allegedly run by former Supermicro staff, CEO Jensen Huang urged Supermicro to fix its compliance problems while saying there was no evidence of smuggling. As further arrests have followed, Nvidia has moved from denying smuggling to downplaying its significance, arguing that China's AI industry now runs largely on domestic Huawei chips.
Officials and lawmakers, however, continue to press the opposite view. Press reports this week said officials believe Nvidia missed red flags in domestic sales that ended up in China, and each new indictment adds weight to the argument that the diversion problem is systemic rather than incidental.
Export Controls Under Strain
For US policymakers, the prosecution underscores both the scale of the gray market in AI chips and the difficulty of policing end-user declarations once hardware leaves the country. The A100 and H100 GPUs at the center of this case predate Washington's strictest controls, but they remain capable of meaningful AI training workloads, which is precisely why they stay on the restricted list and why demand for them persists in China's secondary market.
For the AI industry, the message is that export controls are being enforced against individuals, not just drafted as policy. With frontier model training still dependent on the most advanced accelerators, enforcement actions like this one are likely to remain a fixture of the US-China technology standoff — and freight forwarders, distributors and resellers are now squarely in the crosshairs.
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