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WASHINGTON – The Justice Department today announced criminal charges in five cases and four arrests from five different U.S. Attorney’s offices in connection with the recently launched multi-agency Disruptive Technology Strike Force.
The Disruptive Technology Strike Force is co-led by the Departments of Justice and Commerce to counter efforts by hostile nation-states to illicitly acquire sensitive U.S. technology to advance their authoritarian regimes and facilitate human rights abuses. The Strike Force’s work has led to the unsealing of charges against multiple defendants in five cases accused of crimes including export violations, smuggling and theft of trade secrets.
Two of these cases involve the disruption of alleged procurement networks created to help the Russian military and intelligence services obtain sensitive technology in violation of U.S. laws. In the Eastern District of New York, a Greek national was arrested on May 9 for federal crimes in connection with allegedly acquiring more than 10 different types of sensitive technologies on behalf of the Russian government and serving as a procurement agent for two Russian Specially Designated Nationals (SDNs) operating on behalf of Russia’s intelligence services. In the District of Arizona, two Russian nationals were arrested for their involvement in a procurement scheme to supply multiple Russian commercial airline companies – which were subject to bans from engaging in certain type of commercial transactions – with export-controlled parts and components, including braking technology.
Two of the other cases announced today charge former software engineers with stealing software and hardware source code from U.S. tech companies in order to market it to Chinese competitors. In the Central District of California, a senior software engineer was arrested on May 5 for theft of trade secrets for allegedly stealing source code used in metrology software which is used in “smart” automotive manufacturing equipment. The defendant then allegedly marketed the stolen technology to multiple Chinese companies. In the Northern District of California, a citizen of the People’s Republic of China (PRC) and former Apple engineer is accused of allegedly stealing thousands of documents containing the source code for software and hardware pertaining to Apple’s autonomous vehicle technology. This defendant fled to China and is believed to be working for a PRC-based autonomous vehicle competitor.
The fifth and final case involves a Chinese procurement network established to provide Iran with materials used in weapons of mass destruction (WMDs) and ballistic missiles. In the Southern District of New York, a PRC national is charged with allegedly participating in a scheme to use his employer to conduct transactions with a U.S. financial institution for the benefit of a purported Iranian entity, as part of an effort to provide isostatic graphite, a material used in the production of WMDs, to Iran.
“These charges demonstrate the Justice Department’s commitment to preventing sensitive technology from falling into the hands of foreign adversaries, including Russia, China, and Iran,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “We will not tolerate those who would violate U.S. laws to allow authoritarian regimes and other hostile nations to use advanced technology to threaten U.S. national security and undermine democratic values around the world.”
“Protecting sensitive American technology – like source code for ‘smart’ automotive manufacturing equipment or items used to develop quantum cryptography – from being illegally acquired by our adversaries is why we stood up the Disruptive Technology Strike Force,” said Matthew S. Axelrod, Assistant Secretary for Export Enforcement at the Department of Commerce. “The Strike Force actions announced today reflect the core mission of our Export Enforcement team – keeping our country’s most sensitive technologies out of the world’s most dangerous hands.”
“The theft of technology and trade secrets from U.S. companies is a threat to our economic and national security,” said Assistant Director Suzanne Turner of the FBI’s Counterintelligence Division. “The charges announced today aren’t the only instances of foreign adversaries trying to steal our technology. Combating the illegal transfer of technology is one of the FBI’s highest priorities, and we will continue to work with our federal partners, including the Department of Commerce, to investigate those who steal U.S. technology to ultimately use it in weapons that threaten us and our allies.”
“The protection of sensitive U.S. technologies has been and continues to be a top priority for HSI,” said Assistant Director James Mancuso of Homeland Security Investigations (HSI). “HSI and the partners of the Strike Force will ensure that the U.S. maintains its technologic edge to protect the economic and national security interests of the United States. The Strike Force will be relentless in its pursuit of bad actors that attempt the theft of any sensitive U.S. technologies.”
United States v. Xiangjiang Qiao, Southern District of New York
Today, a federal court in the Southern District of New York unsealed an indictment charging Xiangjiang Qiao aka Joe Hansen, 39, of the People’s Republic of China with sanctions evasion, money laundering, and bank fraud offenses based on Qiao’s alleged participation in a scheme to use a sanctioned Chinese company to provide materials used in the production of WMDs to Iran, in exchange for payments made through the U.S. financial system. Qiao is at large in China.
“As alleged, Xiangjiang Qiao conspired to send isostatic graphite to Iran, in violation of U.S. sanctions. Isostatic graphite is a high-tech material used in the nose tips of intercontinental ballistic missiles,” said U.S. Attorney Damian Williams for the Southern District of New York. “The Iranian regime of terror and repression, and those who facilitate it, pose a grave threat to our national security. This office will continue to work relentlessly to bring to justice those who advance the interests of the Iranian regime and thereby threaten the safety and security of the American people.”
According to court documents, Qiao is a Chinese national and an employee of the China-based company Sinotech Dalian Carbon and Graphite Manufacturing Corporation (Sinotech Dalian). Sinotech Dalian is part of a network of Chinese companies involved in the proliferation of WMDs and that, in particular, provide assistance in the procurement of materials for Iran’s ballistic missile program. In 2014, OFAC sanctioned Sinotech Dalian, adding the company to OFAC’s SDN and Blocked Persons list, explaining that Sinotech Dalian is part of a network of China-based entities used to proliferate WMDs and, specifically, to aid Iranian ballistic missile procurement. Sinotech Dalian’s inclusion on the SDN list prohibits it from using the U.S. financial system to conduct transactions without authorization from OFAC. Qiao is an associate of Li Fangwei, aka Karl Lee, who managed the Sinotech Dalian network of companies and was charged in 2014 with sanctions evasion and other offenses based on his alleged illicit activities as a principal contributor to Iran’s ballistic missile program through China-based entities.
In willful violation of U.S. sanctions on Iran and Sinotech Dalian, between at least March 2019 and September 2022, Qiao participated in a scheme to use Sinotech Dalian, including through transactions involving the U.S. financial system, to supply isostatic graphite to Iran for the production of WMDs. Isostatic graphite is a type of graphite with an ultra-fine grain that is used in the manufacture of WMDs. In particular, isostatic graphite is used in the manufacture of rocket nozzles and reentry vehicle nose tips in intercontinental ballistic missiles. Qiao further took steps to conceal Sinotech Dalian’s involvement in the transaction by creating a bank account in the name of a front company to receive two transfers from a U.S. bank totaling over $15,000 as part of his efforts to facilitate the supply of isostatic graphite to Iran.
Qiao is charged with one count of conspiracy to violate U.S. sanctions against Iran and Sinotech Dalian, in violation of the International Emergency Economic Powers Act (IEEPA), which carries a maximum sentence of 20 years in prison; two counts of violating the IEEPA, which each carry a maximum sentence of 20 years in prison; one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison; two counts of attempted bank fraud, which each carry a maximum sentence of 30 years in prison; one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison; and two counts of money laundering, which each carry a maximum sentence of 20 years in prison.
The FBI New York Field Office and Counterintelligence Division are investigating the case.
Assistant U.S. Attorneys Gillian S. Grossman and Nicholas S. Bradley for the Southern District of New York are prosecuting the case. Within the National Security Division, this matter is being handled by Trial Attorney S. Derek Shugert of the Counterintelligence and Export Control Section.