Recently, the US prosecutors have indicted the co-founders of Super Micro along with two other individuals, accusing them of illegally smuggling servers containing Nvidia GPUs to China. In response, Super Micro announced on Tuesday (April 7) that they have initiated an independent internal investigation into the accused individuals.
In March of this year, the US Department of Justice charged Super Micro’s co-founders Yih-Shyan Liaw and business manager Ruei-Tsang Chang, along with contractor Ting-Wei Sun, for allegedly conspiring to smuggle servers manufactured in the US to China through shell companies in Southeast Asia. Liaw resigned from his position as a director the day after his arrest on March 20.
Based in San Jose, California, Super Micro stated on Tuesday that alongside launching the independent investigation, the company has also initiated an internal review of its “global trade compliance program.”
According to the statement on their official website, the investigation is being led by two independent directors of the company’s board, Chief Independent Director Scott Angel and Audit Committee Chair Tally Liu. They will report the findings and conclusions to the other four independent directors of the board.
The statement further mentioned that while conducting the independent investigation, the company has also launched an internal review of its global trade compliance program, overseen by General Counsel and Senior Vice President Yitai Hu. Newly appointed Acting Compliance Officer DeAnna Luna now reports to the General Counsel, and all investigation results will be directly reported to the board’s independent directors.
The board has hired the top law firm Munger, Tolles & Olson (MTO) with 50 years of independent investigation experience to provide counsel to the independent directors. The firm has brought in consulting company AlixPartners to offer forensic accounting and audit support.
MTO, AlixPartners, and the independent directors will collaborate with Super Micro’s visa accounting firm BDO USA, and the investigation results will be “directly presented” to Angel and Liu.
At present, the independent directors have not set a specific investigation timeline. The company stated that they will not make further comments until the investigation is concluded and new information is released.
Super Micro’s co-founder and CEO, Charles Liang, claimed in the statement that both the internal review and the independent directors’ investigation are to ensure that the company’s technology is rigorously monitored in adherence to the “highest standards of ethics and law.”
However, investors are closely monitoring the compliance and reputation risks of Super Micro, believing that this could impact the relationship between Super Micro and GPU manufacturer Nvidia.
Earlier in March, shareholders of Super Micro formally filed a class-action lawsuit in the San Francisco Federal Court. Besides the charges against the three individuals involved, the lawsuit also alleges securities fraud by Super Micro, accusing the company of concealing the fact that a large portion of servers were being sold to Chinese enterprises, highlighting significant breaches in complying with export control regulations.
After the US prosecutors accused Super Micro executives of smuggling chips to China on March 19, the company’s stock plummeted by 33% on March 20 to $20.53. This significant drop led to the company’s market value evaporating by approximately $6.1 billion. As of April 7, the company’s stock price hovered around $22.05.
Reuters reported in March, citing procurement data, that four Chinese universities with ties to the People’s Liberation Army had purchased Super Micro servers equipped with Nvidia AI chips, which have already been classified by US authorities as export-controlled items.
Back in August 2024, renowned short-selling firm Hindenburg Research released a report accusing Super Micro of accounting issues. Following concerns raised by Super Micro’s audit firm, Ernst & Young, the company engaged Cooley LLP and other institutions for an internal investigation. However, Ernst & Young resigned during the investigation in October 2024, stating they could no longer trust Super Micro’s management. This put Super Micro at risk of delisting due to its failure to timely file financial reports.
At that time, the board appointed then-new director Susie Giordano to form a special committee and investigate the matter. Giordano collaborated with Cooley LLP and the secretariat advisors of the legal accounting firm. The primary focus was on the rehiring of resigned employees in 2018 due to accounting issues, compliance with export control matters related to restricted countries, and sales and revenue recognition practices at the end of the current quarter. The investigation ultimately concluded with no evidence of fraud or misconduct by management or the board. However, the investigation report disclosed to investors at the time did not mention “China.”