US authorities have arrested a California tech CEO accused of smuggling more than $300 million worth of export-controlled servers carrying Nvidia A100 and H100 GPUs into China. Greg Lui, 38, head of Earthmade Computer, faces up to 20 years in prison on conspiracy and money laundering counts, plus a separate smuggling charge carrying a 10-year maximum.

The Department of Justice announced the arrest on Thursday. According to the FBI indictment, Lui used false paperwork and worked with freight forwarders in Malaysia and Singapore to divert shipments into China between October 2023 and August 2026.

What does the indictment allege?

Prosecutors built their case on emails and bank records. One 2024 email discussed an order for 70 servers with export-restricted GPUs, fraudulently declared as destined for Malaysia. After Lui submitted a purchase order to a US manufacturer for 27 of those servers for approximately $7,614,000, a co-conspirator told a Malaysian government official that all 27 had shipped to China.

Other allegations in the filing include:

• A shipment of 92 export-controlled servers routed through Singapore to Malaysia, then Hong Kong, ending at a Chinese firm in Hangzhou — the city The Wall Street Journal described last year as China's AI hub.
• A 2024 shipment of 100 Malaysia-bound servers containing Nvidia H100 GPUs worth over $22 million, covered by fraudulent documentation from a fake buyer whose CEO was listed as "Jackie Lui."
• Lui's purchase, three years earlier, of identifying documents of another individual, used to conduct business transactions supporting the scheme.

In 2024, Lui's firm received more than $176 million from the scheme, according to payment records from his Bank of America and JP Morgan accounts. The DOJ seeks forfeiture of all funds gained through the operation. Lui is charged with conspiring to violate the Export Control Reform Act and the Export Administration Regulations, along with federal smuggling and money laundering laws.

Where does this leave Nvidia?

The arrest follows the linking of an Nvidia senior manager in Taiwan to a similar scheme allegedly run by ex-Supermicro staff. At that time, CEO Jensen Huang urged Supermicro to fix its compliance problem while claiming there was no evidence of smuggling. Nvidia has since shifted from denial to downplaying the role of diverted hardware in China's AI industry, which is now largely powered by Huawei chips.

On Thursday, a spokesperson told Bloomberg that "less than one half of one percent" of Nvidia products have allegedly been diverted to China. "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," the spokesperson said.

Experts counter that the black market is "hard to measure" and likely much larger than reported. A Bloomberg investigation based on conversations with dozens of people across five countries found officials suspect hundreds of thousands of AI chips are moving through a shadow trade, powering small data centers and possibly "a handful of hyperscalers" in China. Those chips could fill a hardware gap China does not expect to close on its own until 2030, one top executive told Bloomberg.

Did Nvidia miss obvious warning signs?

Officials point to concrete lapses. Nvidia and Supermicro visited a Taiwanese facility that bought high-end chips and quickly passed them to a Chinese firm; Taiwan's Coast Guard eventually seized the bulk of the servers after noticing discrepancies in shipping manifests. The FBI alleged Nvidia could have stopped the shipments before they started, since the facility "was clearly insufficient to house all the ordered servers." In another case, a small Thai data center diverting chips relied on fake leases to buy bulk orders; Nvidia would not comment on whether the site was ever visited.

Nvidia disputes that it could have thwarted flagged shipments. "A startup's growth plan in a friendly nation is an opportunity for America, not a 'red flag' to be feared," a spokesperson said. The company continues to work with Megaspeed, an entity the US recently flagged as potentially evading export curbs, and declined to say whether it conducted the urgent checks Washington requested. "When the law is clear, American companies honor US laws as they are, not as America's critics wish they were," the spokesperson said.

Will regulation tighten?

Stricter rules appear unlikely. Industry opposition already watered down one anti-smuggling bill, Huang declined a congressional invitation to testify, and the Trump administration has let Nvidia police itself while moving slowly on suspicious shipments. Sources told Bloomberg that Nvidia maintains an internal whitelist of Asian firms pre-approved for AI chip purchases.