Supermicro—accused of smuggling $2.5 billion in Nvidia chips and servers to China—has been here before, with Iran

Supermicro has spent the past three years riding the AI wave in Silicon Valley but before the recent allegations involving a co-founder smuggling Nvidia chips, it previously ran afoul of export-control regulations.

The hardware manufacturer’s co-founder, Yih-Shyan “Wally” Liaw, was charged on Thursday with conspiring to smuggle about $2.5 billion worth of highly coveted Nvidia GPUs in servers to China. Prosecutors claim that Liaw, along with Supermicro’s Taiwan general manager Ruei-Tsang “Steven” Chang, and a “fixer” named Ting-Wei “Willy” Sun, routed servers with banned Nvidia H200 and B200 GPUs through an unnamed Southeast Asian company to Chinese buyers who wanted the chips. Authorities arrested Liaw and Sun this past week. Chang remains a fugitive, according to the Department of Justice. The company has not been accused of wrongdoing, and neither have co-founders Charles Liang, who is the CEO and chairman, nor his wife, Sara Liu, a board member and co-founder.

In a statement Supermicro said Liaw resigned his board seat on Friday, and he remains on administrative leave, along with Chang. Sun was fired. Supermicro’s stock plummeted in trading on Friday, giving short sellers who have collectively bet $2.6 billion against the company a windfall. Shorts collected an estimated $860 million in single-day gains after the stock sank 33%, according to financial data firm S3 Partners. The day pushed their March gains to nearly $1 billion. Supermicro has said it is cooperating with law enforcement and it was not named in the indictment.

Recommended Video

However, this isn’t Supermicro’s first brush with this type of export-control violation.

Court records and the company’s own disclosures show the latest allegations of smuggling to a restricted market show striking similarities to a 20-year-old enforcement action also involving the company, which was founded in 1993 by Liaw, Liang, and Liu. None of the three were named in the 2006 enforcement or charged with wrongdoing.

In 2006, Supermicro pleaded guilty in federal court to illegally exporting computer equipment to Iran, and paid a $150,000 fine to the Department of Justice. Separately, Supermicro settled a parallel action involving 12 charges related to sales of servers, motherboards, and computer chassis brought by the Commerce Department’s Bureau of Industry and Security (BIS) by paying a $125,400 civil penalty. The company also paid an additional $179,327 to the Treasury Department’s Office of Foreign Assets Control (OFAC) to settle allegations under the Iranian Transactions Regulation, a violation that OFAC said Supermicro did not voluntarily disclose to the regulator.

The two cases—separated by two decades and vast differences in scope—allegedly share a similar pattern. Find a neighboring country where it is legal to sell to, hide the real buyer, and ship the restricted tech to the illegal market.

A representative for Supermicro declined to comment on the Iran violations.

The scheme

The Iran tech sales took place between September 2001 and March 2003, court records show, about a decade after Liaw, Liang, and Liu, who serves as a senior vice president and member of the board, founded Supermicro.

According to the BIS charging document from 2006, Supermicro exported servers, motherboards, and computer chassis from the U.S. through the United Arab Emirates and then onto Iran on six separate occasions without the required licenses from OFAC. A distributor in Dubai served as the pass-through for the equipment. Officials said Supermicro’s “senior director of strategic sales knew of, or had reason to know” about the embargo on sales to Iran. BIS charged the company with three counts of selling goods knowing that export violations would occur and three counts of misrepresenting its shipper export declarations to the U.S. government by claiming it did not need a license to sell the hardware.

Supermicro settled the cases in September 2006 and cooperated with the government’s investigation, records show. It also implemented an in-house export control program before the BIS and DOJ formally brought charges. The sentencing memo stated that the fines were “sufficient to deter other companies from committing similar crimes.”

DOJ: The China conspiracy

The indictment unsealed this week claims that the accused trio of Liaw, Sun, and Chang allegedly conspired to route servers that included the Nvidia chips in 2024. The defendants allegedly sent the servers through an unnamed Southeast Asian company before they made their way to China. Liaw, Sun, and Chang could not be reached for comment.

The mechanics alleged in the indictment mirror the Iran violation from 20 years ago. In the alleged China scheme, the Southeast Asian company submitted repeat purchase orders to Supermicro purportedly for its own use. Instead, when the servers arrived after being assembled in the U.S., the Southeast Asian company allegedly sent them on to the real buyers in China. To keep it all