Prosecutors say Wally Liaw, Supermicro’s co-founder and senior vice president ran one of the biggest export control schemes in recent memory.

Shares of Supermicro got zapped by more than 33% at one point on Friday after the news broke.

The Setup

The U.S. Attorney's Office in Manhattan unsealed charges Thursday against Liaw and two others - a Taiwan-based sales manager named Steven Chang and a contractor named Willy Sun. 

The accusation: They moved billions in Nvidia-powered servers to China, right past the export controls designed to stop exactly that.

The supposed plan: The trio sold the servers to a company in Southeast Asia that had no real use for them. 

• That company filed fake paperwork claiming the machines were staying put, then quietly shipped them to China.

To keep it going, they set up thousands of lookalike "dummy" servers at the Southeast Asian company's facilities - props for any inspector who came looking. 

The real hardware was already gone.

Telling Through Texts

Prosecutors leaned heavily on Liaw's own messages. 

In late 2024, he allegedly pushed the Southeast Asian buyer to adopt Nvidia's newer B200 chip - the one built on the Blackwell architecture - and asked how many they could absorb month by month so he could pitch a bigger allocation to Nvidia.

When export rules tightened in 2025, Liaw reportedly sent the buyer a link to a White House policy statement, urging faster shipments before the new restrictions kicked in.

When a broker forwarded Liaw a news story about other Chinese nationals getting arrested for chip smuggling, Liaw's reply was a string of crying-face emojis. 

What It Means for Investors

SMCI lost a third of its value on Friday - but it’s important to note that Supermicro itself wasn't named as a defendant. 

It suspended both employees, cut ties with the contractor, and put out a statement calling the alleged behavior a violation of company policy. 

But this is a business that already swapped auditors after Ernst & Young walked away in 2024 - and now its co-founder is facing federal conspiracy charges.

For Nvidia, the exposure is indirect, but still exists. 

• Supermicro accounts for roughly 9% of Nvidia's sales. 

The chipmaker has been walking a careful line on China exports - CEO Jensen Huang said this week that Nvidia is restarting production to fill approved orders for China. 

But having a major customer's leadership accused of dodging the very rules Nvidia has to follow adds a layer of risk that didn't exist a week ago.

Shares of Nvidia fell over 3% on Friday - they’re down over 8% this year.