On Thursday, November 20, the US Department of Justice reported a Nvidia artificial intelligence chip smuggling scheme. Two US citizens and two Chinese nationals were arrested for illegally exporting the chips into China. As it rapidly expands internationally, black market trades for the chips are on the rise. However, there could be more reasons behind these illegal trades, for AI technology is being weaponized.
The $3.89 Million Illegal Nvidia Trade
The US Office of Public Affairs revealed the identities of the four suspects allegedly involved in the Nvidia AI chip black-market scheme. On the US side are Floridian Hon-Ning “Matthew” Ho and Alabaman Brian Curtis Raymond. Their Chinese co-conspirators are Jing “Harry” Chen and Cham “Tony” Li.
According to the report, the black-market traders have been operating since September 2023. Ho, Raymond, Chen, and Li worked under the fake real estate company Janford Realtor, LLC. They purchased Nvidia products and exported them illegally to the People’s Republic of China (PRC). They presented falsified documents and contracts to bypass US cargo security.
From there, the GPUs were transferred to Malaysia and Thailand. Their transshipment routes led the PRC to complete the shipment. Janford Realtor, LLC successfully shipped 400 Nvidia A100s between October 2024 and January 2025. Law enforcement halted their third and fourth shipments of 10 Hewlett-Packard supercomputers integrated with H100s and 50 separate H200s. They received a total of $3.89 million USD for their work.
Their AI chip smuggling scheme also violated the Export Control Reform Act (ERCA). This regulation requires every US company to obtain a shipping license, document routes, and provide accurate descriptions and specified use of exported goods. Janford Realtor LLC. has been charged with multiple accounts of money laundering, ERCA violations, and smuggling.
Why Smuggle Nvidia’s Older Processing Chips?
One of the leading theories for the smugglers’ actions is the Chinese developers’ demand for older Nvidia chips. Chinese developers have been deeply affected by the US blacklisting of semiconductors and the resulting restricted access to more powerful processors since 2022.
By 2025, Nvidia’s competitor, Cambricon, had become the tech leader that prompted the nation to search for alternative local development tools. Instead of copying their advanced AI architecture, Cambricon relied on adapting to domestic, accessible technology. Their goal is to create an AI that can offer easy-to-use development tools for all engineers.
This aided DeepSeek developer Liang Wenfang in doing the impossible. On Jan. 27, the AI assistant caused Nvidia’s stock to lose $600 billion in the market. Wenfang told the Financial Times that he created the online AI program using 10,000 A100s purchased in 2021. Then, in 2023, he developed DeepSeek R-1 as a more proficient research tool using 2,000 H800s.
Black Market Chip Trades Have Cybersecurity and Weapon-Dealing Risks
The USERCA allows the President to determine if a company is supplying components for weaponization. AI chips like those from Nvidia have been integrated into military weapons, primarily drones and missiles. For example, Russian drones have built-in AI chips with trained algorithms that can identify their target before attacking.
According to the US Department of Justice, they speculated that Janford Realtor LLC. is aiding China in its military and national surveillance. “The PRC seeks to become the world leader in AI by 2030 and seeks to use it for military modernization efforts and deployment of surveillance tools,” said the document.
China fears that US-manufactured chips are programmed with backdoors that will allow hackers to infiltrate its sectors. The officials of the Cyberspace Administration of China informed Nvidia CEO Jensen Huang on July 31 that, due to the US Security Chip Act’s position tracking protocol, they would limit production of the Blackwell H20 chips. This happened to their rival nation, Taiwan, when one of its major sectors was attacked by UNC3886 a week earlier.
