The US judiciary brings serious charges against a co-founder of Super Micro $SMCI (-2,34%) . Investors reacted with disillusionment and sent the share price plummeting.
There was a time, a good 2 years ago, when many people were invested in the company and competed with each other with $NVDA (-2,34%) higher, further, better. Imagine the headline one day featuring Mr. Huang and his company... 😉🙈
The already tense technological relations between the USA and China have taken on a new, criminal dimension. At the center is a suspected illegal network that was designed to sell state-of-the-art NVIDIA-chips to China, circumventing strict export controls.
Charges brought against co-founder of Super Micro
In this connection, the US judicial authorities have brought charges against Wally Liaw, a co-founder and vice president of Super Micro Computer. He and two other individuals are accused of operating a complex system to conceal hardware shipments for years in order to undermine US national security. "The indictment released today details the alleged attempts to evade U.S. export laws through falsified documents, fake servers to mislead inspectors, and convoluted transshipment practices to conceal the true destination of the restricted AI technology - China," John A. Eisenberg, Assistant Attorney General for National Security, was quoted as saying by the Justice Department. "These chips are a product of American innovation, and the National Security Division will continue to enforce our export control laws to protect that advantage."
An elaborate system of deception
According to the indictment unsealed in Manhattan on Thursday, the scheme involved circumvention of export laws. The scheme was apparently based on the use of a company in Southeast Asia as a way station. This company ordered large quantities of Super Micro servers equipped with NVIDIA's tightly controlled GPUs. However, instead of remaining at the specified destination, the systems were forwarded directly to China, according to the public prosecutor's office. In order to deceive the authorities and internal auditors, those involved are said to have resorted to drastic measures. For example, they are accused of providing inoperable dummy servers in order to fake the whereabouts of the real hardware during inventory checks.
Advertising
"As set forth in the indictment, the defendants engaged in a systematic conspiracy to divert large quantities of servers containing U.S. AI technology to customers in China," said U.S. Attorney Jay Clayton for the Southern District of New York. "They did so using an opaque web of lies, obfuscation, and concealment - all with the goal of boosting sales and generating revenue in violation of U.S. law. Illegal detour schemes such as those uncovered today generate billions of dollars in ill-gotten gains and pose a direct threat to U.S. national security."
Consequences for management and compliance
Although Super Micro Computer as a company is not itself named as a defendant in the federal indictment, the case has immediate personnel consequences. The company reacted promptly to the publication of the allegations and dismissed Wally Liaw and the employee Ruei-Tsang Chang, who was also charged, with immediate effect. In addition, the cooperation with a contractor involved was terminated. In an official statement, the company distanced itself from the actions of the individuals: "The conduct of these individuals as described in the indictment violates company policies and compliance controls, including attempts to circumvent applicable export control laws and regulations." The company also emphasized its willingness to cooperate with the authorities and assured that it is fully cooperating in the investigation of the incidents.
Geopolitical implications and market reaction
The case underlines the strategic importance of AI accelerators, which the US government considers crucial to national security. The NVIDIA chips in question are considered the gold standard for artificial intelligence and are therefore subject to strict performance restrictions for export to China. The alleged smuggling of servers worth billions of dollars poses an "unacceptable risk" according to the indictment.
Super Micro share price collapses
The news caused considerable unrest on the financial markets, causing Super Micro's share price to plummet by 23.29 percent to 23.62 US dollars in pre-market trading on the NASDAQ.
While the investigation continues, the entire industry is facing the challenge of monitoring its supply chains even more closely in order to avoid being caught in the crosshairs of export investigators.
Source: finanzen.net
