infoTECH Feature

December 11, 2015

Chinese Nationals Arrested for Attempting to Steal U.S. Military-Grade Semiconductors

A counterfeiting and smuggling ring involving military-grade semiconductors has been broken up, with three Chinese nationals being held on federal criminal complaints.

According to the Feds, Daofu Zhang, 50, Jiang Guanghou Yan, 33, and Xianfeng Zuo, 37, have all been arrested and charged in connection with a double-pronged initiative involving military-grade processors.

According to local news in Milford, Conn., where the men were arrested, federal law enforcement agents began investigating Yan and a Chinese company known as HK Potential in 2012, for trafficking in counterfeit semiconductors. In October 2014 and in March 2015, Yan allegedly sold a total of 45 counterfeit Intel (News - Alert) Xilinx microprocessors to an undercover agent.

During the transaction, the agent dropped the knowledge that the components would be used on U.S. Navy submarines as part of an extensive contract; Yan’s ears perked up, and in July 2015, Yan allegedly asked whether the undercover agent could obtain the real thing. The complaint also says that he offered to trade counterfeit versions that the agent could swap out, to help avoid theft detection.

The fake ones would look the same but would be “not ok for function,” the complaint alleges.

In the end, Yan agreed to pay $37,000 each (plus provide counterfeit doppelgangers) for 22 Xilinx (News - Alert) military-grade semiconductors, the complaint alleges, adding that in November 2015, he shipped eight of the fake Xilinx components to the undercover agent. He and his accomplices were then arrested this week when attempting to take delivery of the real goods, according to prosecutors.

“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,” said U.S. Attorney Deirdre Daly.

The complaint charges Zhang, Yan, and Zuo with violating the International Emergency Economic Powers Act, which carries a maximum penalty of 20 years of imprisonment and a $1 million fine; and receipt of stolen government property, which carries a maximum penalty of 10 years of imprisonment and a $250,000 fine.

Zhang and Yan are also charged with trafficking in counterfeit goods, which carries a maximum penalty of 10 years of imprisonment and a $2 million fine; and mail fraud, which carries a maximum penalty of 20 years of imprisonment and a $250,000 fine.

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




Edited by Kyle Piscioniere
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