Feds say Houston-linked ‘Operation Gatekeeper’ broke $160M A.I. chip smuggling pipeline to China
HOUSTON - Federal prosecutors with the Southern District of Texas say a sophisticated smuggling network with ties to the Houston area illegally funneled some of the world’s most advanced artificial intelligence computer chips toward China and other restricted destinations, moving at least $160 million in hardware and taking in more than $50 million in overseas payments.
Two businessmen are now in custody, and a Houston-area company and its owner have already pleaded guilty in the case, which investigators are calling "Operation Gatekeeper."
U.S. Attorney Nicholas J. Ganjei for the Southern District of Texas said the network posed a direct threat to national security by trying to ship cutting-edge A.I. technology to "those who would use it against American interests."
"These chips are the building blocks of A.I. superiority and are integral to modern military applications," Ganjei said, warning that the country that controls this technology will "control the future."
Assistant Attorney General for National Security John A. Eisenberg added that the United States’ lead in advanced technology is the result of "hard work and sacrifice" by American engineers and scientists and vowed to aggressively enforce export-control laws to protect that edge.
Local perspective:
Missouri City man pleads guilty
Prosecutors say Alan Hao Hsu, also known as Haochun Hsu, 43, of Missouri City, and his company Hao Global LLC, have already pleaded guilty to smuggling and unlawful export activities.
According to newly unsealed court documents, Hsu and others exported and attempted to export at least $160 million worth of Nvidia H100 and H200 Tensor Core GPUs between October 2024 and May 2025.
Those chips are high-speed graphic processing units designed for:
- Advanced artificial intelligence applications
- Large-scale, high-performance computing
- Both civilian and military uses
Because of their potential role in surveillance, weapons development and other sensitive systems, exporting the H100 and H200 chips to China without U.S. government approval is illegal. Investigators say Hsu and his company:
- Falsified shipping paperwork
- Misclassified the true nature of the goods
- Obscured the real recipients to hide that the chips were headed to China
In total, Hao Global and Hsu received more than $50 million in wire transfers originating from the People’s Republic of China, according to prosecutors. The GPUs were ultimately shipped to China, Hong Kong, and other restricted locations in violation of U.S. export laws.
Hsu faces up to 10 years in federal prison when sentenced on Feb. 18. Hao Global LLC could be fined up to twice the gross gain from the offense and placed on probation. Hsu has been allowed to remain on bond while he awaits sentencing.
What we know:
How investigators say the smuggling network worked
According to court filings, the alleged operation was divided into roles spread across multiple companies and countries.
Some participants purchased the restricted Nvidia chips from U.S. suppliers. Others allegedly handled disguising and repackaging shipments. Logistics partners helped move the hardware through U.S. warehouses and then overseas.
In one part of the scheme, co-conspirators allegedly used straw buyers and intermediaries to acquire Nvidia GPUs, claiming the hardware was for customers in the United States or in third countries that do not require export licenses.
Once the GPUs were in the U.S. supply chain, investigators say workers:
- Removed Nvidia labels
- Re-labelled the chips with the fake brand name "SANDKYAN"
- Described the items on export paperwork as generic "computer parts"
From there, the mislabeled GPUs were shipped or prepared for shipment to China and Hong Kong, according to the charges.
Dig deeper:
Two more men charged in connection with the scheme
Prosecutors say two other men — both originally from the People’s Republic of China — are now facing federal charges connected to Operation Gatekeeper:
- Fanyue "Tom" Gong, 43 – a PRC citizen living in Brooklyn, New York
- Benlin Yuan, 58 – a Canadian citizen living in Mississauga, Ontario
Yuan is the CEO of a Sterling, Virginia, IT services company that prosecutors say is the U.S. subsidiary of a large Beijing-based IT firm. Gong owns a New York technology company.
According to the charges, Gong and Yuan each conspired with employees of a Hong Kong-based logistics company and a China-based AI company to get around U.S. export controls. In Gong’s case, co-conspirators allegedly used straw purchasers and U.S. warehouses to disguise the origin and destination of GPUs, removed Nvidia labels, and rebranded the hardware as "SANDKYAN" before export.
In Yuan’s case, prosecutors say he recruited and organized inspectors to examine mislabeled GPUs on behalf of the Hong Kong logistics company, and told them not to disclose they were destined for China.
Court documents also allege that Yuan:
- Helped craft a cover story his company could use to get detained GPUs and other equipment released
- Discussed providing false information to U.S. authorities about who the true end-user of the chips was
- Helped direct how another shipment of Nvidia GPUs would be handled and stored
If convicted:
- Yuan faces up to 20 years in prison for conspiracy to violate the Export Control Reform Act.
- Gong faces up to 10 years in prison on a charge of conspiracy to smuggle goods from the United States.
Both men are currently in custody while their criminal cases move forward.
Big picture view:
Why these chips matter
The Nvidia H100 and H200 GPUs at the center of Operation Gatekeeper are considered among the most advanced processors in the world.
They are designed to:
- Power generative AI and large language models
- Process enormous data sets at extremely high speeds
- Accelerate scientific and high-performance computing
Because the same technology that enables chatbots and data centers can also be used for military systems, surveillance tools and weapons development, the U.S. tightly controls where these chips can be shipped.
Officials say cases like this highlight how valuable and vulnerable U.S. AI technology has become on the global stage.
What's next:
Who’s leading the investigation?
According to the Department of Justice, the following agencies worked together on Operation Gatekeeper:
- Department of Commerce – Bureau of Industry and Security, Office of Export Enforcement (Dallas Field Office)
- U.S. Immigration and Customs Enforcement – Homeland Security Investigations (Dallas)
- FBI field offices in New York City and Washington, D.C.
- Assistant U.S. Attorneys John Marck and Mark McIntyre of the Southern District of Texas are prosecuting the case, along with Trial Attorneys Fatema Merchant and Yifei Zheng from the Department of Justice’s National Security Division.
Federal officials say Operation Gatekeeper is ongoing and more enforcement actions could follow as investigators continue to track and shut down illegal pipelines for U.S. AI technology.
The Source: Information from press release