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The two Los Angeles County residents face federal charges after being arrested on suspicion of illegally exporting tens of millions of dollars worth of artificial intelligence microchips, officials said.
Chuan Jeng, 28, of Pasadena and Seawei Yang, 28, of El Monte, were taken into custody on Saturday after allegedly involved in exporting illegal processing units used in modern computing and artificial intelligence applications, according to a statement from the US Law Office for the Eastern District of California.
Authorities said federal prosecutors were both Chinese citizens, but Geng, a legal permanent resident of US Yang, was illegally in the country because he overestimated his visa.
In the criminal charges, U.S. Department of Justice officials alleged that the pair “willfully and willingly” undermined the illegal shipments from China for nearly three years.
Prosecutors say Geng and Yang own and operate an El Monte-based technology company called Alx Solutions Inc. It specializes in providing high-power central and graphics processing units for individuals and businesses, according to business records and its website.
The business also included high-performance microchips that could be used to develop AI technologies, such as self-driving cars and medical diagnostic systems.
Prosecutors allege that shortly after the US Department of Commerce began requesting licenses or approvals to export these “delicate technologies” overseas, ALX Solutions was involved in China through third parties in at least 20 unlicensed or misunderstood chip shipments.
“Shipping via ALX Solutions included exports from the US to shipping and freight carriers in Singapore and Malaysia, which are commonly used as a transshipment point to hide illegal shipments to China,” the US Power of Attorney said in a statement.
Prosecutors said reviews of export and business records showed the company received numerous payments from companies in Hong Kong and China. Geng and Yang were accused of being mistakenly labelled Graphics Processing Units (GPUs) as licensed, despite not applying or obtaining licenses from the Department of Commerce at multiple shipments.
Last week, law enforcement seized two mobile phones belonging to Geng and Yang from the ALX Solutions office. This is said to have revealed a “criminal” communication that ships chips through Malaysia to circumvent export laws, according to the US Law Office.
Geng and Yang are accused of violating the Export Control Reform Act, a 2018 law that strengthened federal control over exports of “emerging and basic technologies.” Violations can be sentenced to a maximum sentence of 20 years in federal prison.
On Monday, a US District Court judge ordered Geng to be released on a $250,000 bond and was scheduled for a custody hearing for Yang on August 12.
The FBI and the Department of Commerce’s Industrial Security Bureau are continuing their investigation, officials said. The two are scheduled for arrests on September 11th.
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