Chinese nationals arrested for stealing military-grade chips

Three Chinese nationals may face prison time in the United States for allegedly entering into a scheme to illegally export semiconductors stolen from the U.S. military.

The charges stem from a counterfeit semiconductor trafficking investigation against Jiang Guanghou Yan and HK Potential Electronics Co. Ltd, a Chinese firm, according to a statement from the office of Deirdre M. Daly, the U.S. Attorney for Connecticut.

Yan was arrested Thursday, May 10 in Milford, Conn., along with Daofu Zhang and Xianfeng Zuo, according to the statement from Daly's office.

According to the complaint against the defendants, federal agents began investigating Yan and HK Potential in 2012. The complaint alleges that Yan sold a total of 45 counterfeit Intel microprocessors to an undercover agent who advised Yan that the chips would be used on a Navy submarine contract.

In July 2015, Yan asked the undercover agent to obtain 22 military-grade Xilinx FPGAs, according to the complaint. Yan offered to pay $37,000 for each FPGA, the complaint alleges.

After the agent told Yan that the Xilinx chips could be stolen from a U.S. Navy base, Yan offered to provide counterfeit Xilinx devices that could be substituted for the stolen chips in order to prevent the detection of theft, according to the complaint.

Yan admitted that the fake Xilinx FPGAs would not function properly, according to the complaint. In November, Yan shipped eight of the fake chips to the agent, the complaint alleges.

Yan, Zhang and Zuo travelled to the United States Dec. 6 and were arrested Thursday while attempting to take delivery of the military-grade Xilinx chips from the agent, according to the complaint.

"The Justice Department and our federal law enforcement partners are committed to prosecuting those who would supply our armed forces with counterfeit electronic components, as well as those who attempt to steal sophisticated U.S. military components and distribute them to places unknown," Daly said in the statement.

The three defendants made initial appearances before a U.S. magistrate judge in New Haven, Conn. Thursday and were detained.

All three have been charged with violating the International Emergency Economic Powers Act, which carries a maximum penalty of 20 years of imprisonment and a $1 million fine. All three were also charged with receipt of stolen government property, which carries a maximum penalty of 10 years of imprisonment and a $250,000 fine.

Zhang and Zuo were also charged with conspiracy, which carries a maximum penalty of five years of imprisonment and a $250,000 fine.

Daly's office said the matter is being investigated by the Defense Criminal Investigative Service, Homeland Security Investigations, the Federal Bureau of Investigation, the U.S. Department of Commerce's Bureau of Industry and Security and the U.S. Air Force's Office of Special Investigations. The case is being prosecuted by Assistant U.S. Attorney Edward Chang.

- Dylan McGrath
  EE Times U.S.