Quick Overview:

  • Super Micro Computer co-founder Yih-Shyan "Wally" Liaw (71), Taiwan sales manager Ruei-Tsang "Steven" Chang (53), and contractor Ting-Wei "Willy" Sun (44) have been indicted for allegedly participating in a scheme to "secretly transfer servers loaded with cutting-edge American AI technology worth billions of dollars to China." The news comes from a statement released Thursday by the U.S. Attorney's Office for the Southern District of New York.
  • The indictment, unsealed Thursday, charges Liaw, Chang, and Sun each with one count of conspiracy to violate the Export Control Reform Act, one count of conspiracy to smuggle goods from the United States, and one count of conspiracy to defraud the U.S. government. According to the statement, Liaw and Sun were arrested Thursday and appeared in court in the Northern District of California; Chang remains at large.
  • AI server maker Super Micro Computer said it was not named as a defendant in the indictment but has placed Liaw, who also serves as senior vice president of business development and a board member, and Chang on administrative leave, and "immediately terminated" its relationship with Sun.

In-Depth Analysis:

Shares of San Jose, California-based Super Micro Computer fell 33% on Friday, closing at $20.53.

The company said in a statement that the conduct alleged in the indictment is inconsistent with its policies. Super Micro said in a Thursday statement: "The conduct alleged in the indictment against these individuals violates the Company's policies and compliance controls, including actions to circumvent applicable export control laws and regulations. Super Micro maintains a robust compliance program and is committed to full compliance with all applicable U.S. export and re-export control laws and regulations."

According to the indictment (which does not explicitly name Super Micro in the statement), Liaw and Chang worked with third-party brokers and customers in China to place orders for servers. These servers were typically assembled in the United States, shipped to the U.S. manufacturer's facility in Taiwan, and then delivered to another company in Southeast Asia.

That Southeast Asian company then worked with the defendants to "use a shipping logistics company to repackage the U.S. manufacturer's servers and place them in unmarked boxes to conceal their contents before shipping them to the final destination in China." The indictment shows the scheme involved the U.S. manufacturer purchasing servers worth approximately $2.5 billion between 2024 and 2025.

The three allegedly took steps to conceal the scheme and "deceive the U.S. manufacturer's compliance team," for which they arranged "thousands of 'dummy servers'—non-working replicas of real servers—for inspection. For example, to pass inspections by the U.S. Department of Commerce, they used hair dryers to remove and reapply labels and serial number stickers to server boxes and servers."

In recent years, Super Micro's accounting and internal controls have drawn scrutiny.

The now-defunct short-seller Hindenburg Research released a highly critical report on Super Micro in August 2024, detailing "obvious accounting red flags." Following the report, Super Micro delayed the filing of its annual 10-K report and announced it would complete an evaluation of its internal controls.

In December 2024, the company said it would "transition" to a new chief financial officer, with current treasurer David Weigand remaining until a successor is appointed. That month, an independent special committee investigating matters including the integrity of Super Micro's audit committee and company management and their "commitment" to accurate financial statements made recommendations, including a finance team overhaul.

The special committee directed in a statement at the time that the company should "appoint a new chief financial officer with experience as a senior finance professional at a large public company as soon as practicable." Weigand became CFO in 2021 and remains Super Micro's finance chief.

As of press time, Super Micro did not immediately respond to a request for comment.