Federal agents just busted open this wild smuggling network in LA. Picture this: a couple of twenty-somethings allegedly hustling high-tech graphics processors right under everyone’s nose. They ran the whole operation out of some dingy strip-mall office in El Monte. Not exactly the villain lair you’d imagine, right?
So, according to the unsealed court docs, there’s this thing called ALX Solutions Inc. Poof, it shows up soon after some new chip-export rules dropped in late 2022. Fast forward twenty months, these folks managed to sneak out 21 shipments. They’d play it cool, sending stuff through places like Singapore or Malaysia, you know, claiming it was just “commodity video cards.” No big deal, right? But oops — during a routine check, customs scanners spotted crates loaded with top-tier accelerators just labeled as “computer parts.” Smooth move, guys.
And get this, one Hong Kong buyer wired a solid $1 million upfront. Meanwhile, smaller payments dripped in from mainland firms tied to defense companies. Investigators peeked into their Signal chats too. Co-founder Chuan Geng was basically coaching partner Shiwei Yang to, you know, “slice orders, never repeat a forwarder,” and so on. Spooky spy stuff.
The whole situation leans on this Bureau of Industry and Security rule from October 2022. It’s all about controlling chips that can handle insane neural-network loads. If you don’t get a license from Commerce first, you’re outta luck. They even set this technical threshold — 600 gigabytes per second of interconnect bandwidth. Sounds pretty much aligned with hardware that could boost military AI capabilities.
Honestly, the affidavit reads like something out of a spy movie. There’s a mislabelled pallet flagged by Long Beach customs, serial numbers traced back to Nvidia’s partner database, and a stakeout that followed a delivery van to ALX’s warehouse. When agents finally got a warrant to search the place, what do they find? Empty trays for a thousand GPUs, easily $25 million on the street, with packing slips to some startup AI company in Shenzhen.
Geng, who’s a U.S. resident, didn’t put up a fight. Yang, on the other hand, got caught at LAX with a one-way ticket to Taipei. Classic escape movie scene. Geng got out on a $250,000 bond; Yang’s still in custody, waiting for an August 12 hearing. They’re facing charges with penalties that could mean 20 years in prison.
The Justice Department is throwing everything at this, along with the FBI and BIS. They’re calling it “classic transshipment with modern flair.” Meanwhile, BIS might hit them with civil penalties and a lifetime export ban.
Some public filings? They show Geng was once the finance chief for a short-lived e-commerce thing that fizzled out due to unpaid taxes. Yang used to co-own an LA shop that dealt with overseas sneaker flippers. Neither of them has a tech background, adding fuel to the claim that ALX was just a front to ship chips to China.
Prosecutors still need to get an indictment from a grand jury, though. And it looks like the defense is ready to argue that the chips were just below the performance threshold when bought. We might see a lot of expert talk on bandwidth and firmware soon. By spring 2026, we could have a trial that’ll shed light on Washington’s approach to stopping silicon smuggling in the age of AI.
News Source: Justice Department
