Federal prosecutors have recently unveiled a large-scale international operation of smuggling high-performance Nvidia GPUs and HP supercomputers from the United States to China. According to these sources, four individuals were found to be actively involved in this scheme, which involved a network of transactions and shady paperwork to bypass the strict US export restrictions on the sophisticated AI hardware. These details were first reported by The Verge.
It is worth noting that the US government has put the brakes on exporting Nvidia’s most powerful chips, which includes the H100 and the freshly released H200, to China. And there is a good reason behind this – these state-of-the-art chips are the key to training large AI models. Owing to a bundle of associated national security concerns, their export is tightly monitored and controlled.
However, several Chinese AI firms, such as the renowned DeepSeek, have managed to develop competent models. This fact has led to a cascade of queries about their methods of procuring the necessary hardware. When DeepSeek launched its R1 AI model earlier this year, it led Scale AI CEO, Alexander Wang, to conjecture that China might have a more substantial number of Nvidia’s high-performance GPUs than what we previously believed. Interestingly, the exposure of this smuggling operation might cast some light on how these chips could potentially be sneaking into the country.
The court documents reveal that the smuggling operation was set in motion in late 2023. The accused – Mathew Ho, Brian Curtis Raymond, Tony Li, and Harry Chen – are believed to have conspired to export at least 50 H200 GPUs and multitudes of H100 GPUs, bypassing requisite licenses.
Mathew Ho, a US citizen, was a registered agent for a key entity in the operation, a front company named Janford Realtor, LLC. On the surface, the company had nothing to do with real estate; instead, it served as an inconspicuous channel for the illegal export of GPUs that had crucial applications in AI and supercomputing.
Brian Curtis Raymond, based in Huntsville, Alabama, was the CEO and sole owner of another company allegedly involved in the scheme, known as “US Company 1” in the court files. This company is reported to have received about $2 million from Janford Realtor for the GPUs. Raymond’s LinkedIn profile identifies him as the CEO of Bitworks, a company that supports Nvidia and AMD solutions and, interestingly, refers to him as the newly appointed CTO of a cloud computing company named Corvex. The group is believed to have used forged shipping documents and contracts to muddy the waters around their exports and routed their payments through various Chinese bank accounts.
Nvidia, which reported a mammoth $57 billion in quarterly revenue recently, responding to the allegations, emphasized the intensity and detailed nature of such smuggling operations. The tech giant’s spokesperson, John Rizzo said, “Trying to cobble together datacenters from smuggled products is a nonstarter, both technically and economically,” and added that the company neither provides support nor repairs for the restricted products.
The recent bust underlines the stiff competition between the US and China over the control of advanced AI technology and showcases the extent some people are willing to go to dodge export regulations. Currently, out of the four individuals involved in the case, only one is under arrest. The charges against them include smuggling, conspiracy, and money laundering.
You can further delve into this matter and read the full article in The Verge.
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