Two Los Angeles County residents face federal charges after they were arrested on suspicion of illegally exporting tens of millions of dollars’ worth of artificial intelligence microchips to China, authorities said.
Chuan Geng, 28, of Pasadena, and Shiwei Yang, 28, of El Monte, were taken into custody on Saturday for their alleged involvement in the illegal overseas export of processing units used in modern computing and artificial intelligence applications, according to a statement from the U.S. attorney’s office for the Eastern District of California.
Federal prosecutors said both were Chinese nationals, though Geng is a lawful permanent resident of the U.S. Yang, however, was in the country illegally as she had overstayed her visa, according to authorities.
In a criminal complaint, U.S. Justice Department officials alleged the pair had “knowingly and willingly” undercut federal export regulations to conceal illegal shipments to China for nearly three years.
Prosecutors say Geng and Yang owned and operated an El Monte-based technology company called ALX Solutions Inc. The company specialized in providing high-powered central and graphics processing units for individuals and businesses, according to business records and its website.
The business also had high-performance microchips capable of being used in the development of AI technology, such as in self-driving cars and medical diagnosis systems, officials said.
Prosecutors allege that shortly after the U.S. Department of Commerce began requiring a license or authorization to export these “sensitive technologies” overseas, ALX Solutions was involved in at least 20 unlicensed or mislabeled chip shipments to China through third-party countries.
“Shipments by ALX Solutions involved exports from the U.S. to shipping and freight-forwarding companies in Singapore and Malaysia, which commonly are used as transshipment points to conceal illegal shipments to China,” the U.S. attorney’s office said in its statement.
Prosecutors said a review of export and business records showed that the company received numerous payments from companies in Hong Kong and China, which were not the stated entities to which they had sold their goods. Geng and Yang were also accused of falsely labeling graphics processing units, or GPUs, as licensed — despite them not having applied for or obtained a license from the Commerce Department on multiple shipments.
Last week, law enforcement seized two phones belonging to Geng and Yang from the ALX Solutions’ office that allegedly revealed “incriminating” communications regarding shipping chips through Malaysia to evade export laws, according to the U.S. attorney’s office.
Geng and Yang are charged with violating the Export Control Reform Act, a 2018 law that strengthened federal controls regarding the export of “emerging and foundational technologies.” Violations can carry a maximum sentence of 20 years in federal prison.
On Monday, a U.S. District Court judge ordered that Geng be released on $250,000 bond and scheduled a detention hearing for Yang on Aug. 12. Neither entered a plea Monday.
The FBI and the Department of Commerce Bureau of Industry and Security are continuing to investigate, officials said. Arraignment for the two is scheduled for Sept. 11.
