Taiwan has moved to prosecute nine people — among them employees of Nvidia (NASDAQ: NVDA) and Super Micro (NASDAQ: SMCI) — after prosecutors filed charges against a group accused of operating a covert channel that moved AI servers into China despite a ban on those shipments.

The Nvidia employee linked to the illegal export of AI servers to China has been detained since July. Super Micro, for its part, has terminated the staffers implicated in the same $2.5 billion smuggling probe.

How the AI servers were rerouted to China

According to Taiwanese prosecutors, the group now facing charges forged shipping export documents and shipping records to hide the trail of the chips they were illegally diverting to China.

The hardware at the heart of the case is built by Super Micro Computer and runs on Nvidia processors. The United States, however, imposed licensing requirements in 2022 for anyone seeking to deploy that specific hardware class in China, Hong Kong and Macau — a restriction that sits within a broader US export-control push launched that year over concerns that advanced AI computing hardware could aid China's military modernization and artificial-intelligence development.

Where the $2.5 billion case began

Taipei already had a case against three people held by authorities on these accusations — even before the July detention of the Nvidia employee was disclosed.

The legal trail, however, stretches back to March. The US Attorney's Office for the Southern District of New York named Super Micro co-founder and board member Yih-Shyan "Wally" Liaw, Taiwan-based sales manager Ruei-Tsan "Steven" Chang, and contractor Ting-Wei "Willy" Sun as the driving forces behind a $2.5 billion operation smuggling Nvidia servers into China.

Liaw holds a $464 million stake in Super Micro. Others implicated in the chip smuggling ring include a Southeast Asian firm that served as a middleman and provided fake records, as Cryptopolitan reported, citing filings.

With Taipei now bringing formal charges, the alleged scheme is being pursued in parallel by prosecutors in Taiwan and the United States — two jurisdictions with separate legal systems that are both acting on the same alleged rerouting of US-controlled hardware.

Super Micro and Nvidia distance themselves from the smuggling

Super Micro has moved quickly to sever ties with anyone seriously involved in the server rerouting operation, firing staff with exposure and investigating top leadership for possible compromise. The company has stressed that it is not a defendant in the US case.

Nvidia CEO Jensen Huang, speaking to reporters at Songshan airport during a Taipei visit, said the company expects its partners to follow the law. "We insist our partners are compliant," Huang said, adding that he hoped they would tighten their compliance to prevent future breaches.

Super Micro told reporters the same thing about its own compliance rules, stating that the accused staffers were in violation of its export-control policies if the allegations against them prove to be true.

China has historically ranked among Nvidia's largest markets for data-center hardware, which the company itself has flagged as a commercial consideration under the US restrictions. Huang, meanwhile, has not given up on finding a legal route into China, pitching Nvidia's licensed H200 chip as an alternative. Beijing has yet to give the green light to that plan — a decision that, alongside the parallel court proceedings in Taipei and New York, will determine how the enforcement landscape around AI hardware exports takes shape.

Semiconductors anchor Taiwan's economy, and Taiwanese authorities maintain a more hardline policy on sensitive technology leaving the island. In July, prosecutors charged a former TSMC employee over the alleged theft of chip know-how that Taipei classifies among its national core assets — a case investigators say was aimed at China, Cryptopolitan reported.