US prosecutors say more than US$300 million of export-controlled servers packed with high-end AI chips was routed to China through countries including Malaysia and Singapore. For readers here, the detail that stands out is local: the US Justice Department says two Malaysia-based companies paid about US$176 million into the operation during 2024, part of a route that moved the hardware through the region rather than shipping it to China directly.
The case puts hard numbers on Malaysia's awkward place in the AI-chip trade, and on a trans-shipment risk the country had already moved to address.
What the US alleges
According to the US Justice Department, Greg Lui, 38, of San Gabriel, California, was arrested on 1 October 2026 on a three-count federal indictment returned on 29 September. Lui owns Earthmade Computer Inc. of City of Industry, California. The charges are conspiracy to violate US export-control law, outbound smuggling, and conspiracy to commit money laundering, carrying maximum terms of 20, 10 and 20 years. It was announced by Assistant Attorney General John Eisenberg of the department's National Security Division, alongside the US Attorney's office and the FBI.
Prosecutors allege that Lui and others bought servers built around high-end GPUs, filed false documents with US manufacturers about where the equipment was headed, then shipped it to Malaysia and Singapore, where no US licence was required, before it was re-exported to China. The department says that from January to October 2024, Earthmade received more than US$176 million from two Malaysia-based companies. CybersecurityNews, reporting on the indictment, notes one January 2024 order of 27 servers worth US$7.614 million. The department has not publicly identified the chip makers or models. The allegations have not been tested at trial, and Lui is presumed innocent.
Why this lands in Malaysia
Being named as a transit point is not an accusation against Malaysia, and the two companies are not publicly identified in the Justice Department's account. But that Malaysia can be used as a staging post this way is not a new worry. It speaks to the same trans-shipment worry behind an export-control directive the country introduced in 2025, more than a year before this indictment.
When Malaysia introduced the measure in mid-2025, its framing had two layers, as law firm Baker McKenzie set out. The Ministry of Investment, Trade and Industry's 14 July statement indicated that US-origin advanced AI chips would be subject to control, requiring a Strategic Trade Permit for their export, trans-shipment and transit. The underlying Directive No. 1/2025, issued the same day under the catch-all provision of the Strategic Trade Act 2010, is written more broadly: it turns on whether an exporter knows or suspects that covered chips are bound for a restricted use, with at least 30 days' notice to the ministry, which then decides whether to allow the shipment. Baker McKenzie read the move as a response to concerns about Malaysia being used as a trans-shipment hub to get around US export controls, while cautioning that the position on shipments to Chinese technology firms was not fully settled. Whether any particular server in this case would have fallen under it is not something the public record establishes.
The balancing act gets harder
The kind of illicit routing prosecutors describe is the shadow of a legitimate trade Malaysia is actively courting. The country has chased the kind of large AI data-centre investment we have reported on alongside rising graphics-card prices in our own market, and it is home to a Malaysian sovereign-AI deployment that ran DeepSeek alongside US silicon, which we have read as a country trying to keep a foot in both camps.
Each foreign case that names a Malaysian leg adds pressure to show the new rules work in practice, not just on paper. Whether the two Malaysia-based companies described by US prosecutors face any action at home is the next concrete thing to watch, and nothing public yet says they will.
Image(s) courtesy of Taylor Vick and Andy Li on Unsplash. Data illustration by ProductNation.
