Federal agents on Thursday arrested Yih-Shyan “Wally” Liaw, a prominent Silicon Valley executive deep in the AI ecosystem who co-founded Supermicro in 1993 and is a close confidante of CEO and chairman Charles Liang. The stock tumbled roughly 12% in after-hours trading following the news.
To keep the clandestine scheme from raising red flags with Supermicro’s compliance team, the defendants and the Southeast Asian company executives would fake documents and send false communications meant to show that the Southeast Asian company was the legitimate end buyer. During the two-year period, that company purchased about $2.5 billion worth of Supermicro servers under the alleged arrangement. The operation eventually grew even more “brazen,” authorities claim. The DOJ alleges that during a three-week period from late April to mid-May 2025, about half a billion worth of servers assembled in the U.S. were shipped to China as part of the alleged conspiracy.
To keep it under wraps, the defendants allegedly staged thousands of fake dummy servers—actual, physical replicas of Supermicro’s actual products, authorities claim—at the warehouse where the Southeast Asian company was supposed to be storing its purchases. In reality, the real servers were long gone and had allegedly been shipped to China already.
The DOJ claims surveillance cameras filmed Sun and an unnamed co-conspirator unboxing the fake servers, using a hair dryer to remove and reapply serial-number stickers and labels onto the dummy server boxes, then carefully repackaging them to pass inspection. The same phony servers were later used again to fool an audit conducted by the U.S. Department of Commerce, the DOJ alleges. Throughout the scheme, the defendants allegedly used encrypted messaging apps to discuss server quantities, delivery locations in China, and ways of keeping the operation hidden from Supermicro’s compliance team and U.S. authorities.
An Nvidia spokesperson said compliance is a “top priority” for the $4 trillion chipmaker.
“We continue to work closely with our customers and the government on compliance programs as export regulations have expanded. Unlawful diversion of controlled U.S. computers to China is a losing proposition across the board—Nvidia does not provide any service or support for such systems, and the enforcement mechanisms are rigorous and effective.”
“The conduct by these individuals alleged in the indictment is a contravention of the Company’s policies and compliance controls, including efforts to circumvent applicable export control laws and regulations,” the statement says. “Supermicro maintains a robust compliance program and is committed to full adherence to all applicable U.S. export and re-export control laws and regulations.”
Authorities claim the scheme was all engineered to make money from Chinese buyers and thwart the export controls.
“The indictment unsealed today details alleged efforts to evade U.S. export laws through false documents, staged dummy servers to mislead inspectors, and convoluted transshipment schemes, in order to obfuscate the true destination of restricted AI technology—China,” said John A. Eisenberg, Assistant Attorney General for National Security.
The stream of compliance and governance issues leading up to Liaw’s stunning arrest all point to mounting problems with controls at the hardware manufacturer.
The Backstory
However, around the same time, Supermicro’s auditor Ernst & Young sent a letter to the board’s audit committee flagging concerns about governance, transparency, and raising questions about whether the annual report could be filed on time. The board responded by appointing a special committee and bringing in Cooley LLP and forensic accounting firm Secretariat Advisors to investigate—again.
“As alleged in the indictment, the defendants participated in a systematic scheme to divert massive quantities of servers housing U.S. artificial intelligence technology to customers in China,” said U.S. Attorney Jay Clayton for the Southern District of New York. “They did so through a tangled web of lies, obfuscation, and concealment—all to drive sales and generate revenues in violation of U.S. law. Diversion schemes like those disrupted today generate billions of dollars in ill-gotten gains and pose a direct threat to U.S. national security.”
Liaw has been a close confidante of Liang and his wife, Sara Liu, who all co-founded the company together, for years. While other companies are not named in the indictment, Supermicro has extensive overseas operations built around close family ties to the founding couple. The web of business relationships has long drawn scrutiny from investors, short sellers, and regulators.
According to the company’s disclosures, two Taiwan-based companies, Ablecom Technology and Compuware Technology, collectively received about $983 million in payments from Supermicro over the past three fiscal years. Both share a home with Supermicro’s own Taiwan manufacturing facility in what is called “Supermicro AI Technology Park” in the Taoyuan area.
Liaw, who holds a 2.6% stake in Supermicro, is one of the company’s largest individual shareholders outside of the Liang-Liu family, which controls about 13.4% of Supermicro’s stock. A sibling of Liaw’s owns about 11.7% of Ablecom’s stock and 8.7% of Compuware’s stock.
Liaw could not be reached for comment.
