Federal agents arrested Yih-Shyan “Wally” Liaw, a key figure in the Silicon Valley AI landscape and co-founder of Supermicro, on Thursday, leading to a dramatic 12% drop in the company’s stock during after-hours trading. The indictment, unsealed by the Department of Justice (DOJ) in Manhattan federal court, accused Liaw and two others of conspiring to covertly divert billions of dollars’ worth of Supermicro AI servers to China, violating U.S. export control laws.
Liaw, 71, was charged alongside Ruei-Tsang “Steven” Chang, Supermicro’s general manager in Taiwan, who remains at large, and Ting-Wei “Willy” Sun, who was apprehended during the operation. The DOJ claims the conspiracy took place over the course of 2024 and 2025, during which Liaw and Chang allegedly sourced buyers in China for AI servers, characterized by their Nvidia GPU chips.
The scheme allegedly involved a complex pipeline where executives at an unnamed Southeast Asian company would place orders for the servers, which would then be assembled in the U.S. and shipped to Taiwan. The servers would subsequently be rerouted to the Southeast Asian company before being forwarded to their ultimate destination in China. To avoid detection by Supermicro’s compliance team, Liaw and Chang purportedly created fake documentation and communications, making it appear that the Southeast Asian company was the legitimate end buyer.
In total, the DOJ estimates that about $2.5 billion worth of Supermicro servers were sold under this arrangement. Authorities claim the operation escalated in audacity, with approximately half a billion dollars’ worth of servers shipped to China within a three-week span in 2025 alone. To further maintain the appearance of compliance, the defendants reportedly staged thousands of dummy servers at the Southeast Asian company’s warehouse, which masked the true violation from scrutiny.
Evidence presented in the case alleges that Sun and another co-conspirator were seen on surveillance footage repackaging the dummy servers to pass inspection, utilizing techniques like altering serial-number stickers. Throughout this clandestine operation, encrypted messaging applications were used to discuss shipment logistics and to coordinate the efforts to evade detection from Supermicro’s compliance team and U.S. officials.
The Nvidia chips within the Supermicro servers were a critical target for the buyers, as Liaw had historically maintained close business relationships with Nvidia and its CEO. An Nvidia representative emphasized that compliance with export regulations is paramount and that the company does not support unlawful diversions of its technology.
In a statement, Supermicro distanced itself from the indictment, clarifying that it is not a defendant in the case. Liaw has been placed on administrative leave, as have other implicated individuals. The company emphasized its commitment to compliance and cooperation with the ongoing federal investigation, condemning the alleged actions as violations of its policies and compliance controls.
The broader implications of this episode underline systemic compliance difficulties within Supermicro, which has faced scrutiny over governance and transparency issues in recent years. Last August, the company was targeted by short-seller Hindenburg Research, which alleged that its accounting practices were once again under scrutiny, a claim Supermicro denied.
The fallout from Liaw’s arrest raises potential concerns about the stability of Supermicro, especially as the company is a significant player in the booming AI sector, which is currently valued at around $700 billion. Its servers are crucial for many AI operations, leveraging advanced Nvidia technology and proprietary cooling solutions. As tensions with China remain high, U.S. regulatory bodies have enacted stringent export controls aimed at safeguarding cutting-edge technology from falling into foreign hands. The laws in question have been in effect since October 2022, aimed specifically at advanced computing chips and related systems.
Liaw and his co-defendants now face severe penalties, potentially up to 20 years in prison for conspiracy to violate the Export Controls Reform Act, among other charges. The case not only highlights significant issues within Supermicro but also reflects the increasing challenges U.S. corporations face as they navigate international relations in the tech arena.
