Li Chen Sentenced to Prison for Conspiring to Steal Trade Secrets, Sell Them in China

“The greatest long-term threat to our nation’s information and intellectual property, and to our economic vitality, is the counterintelligence and economic espionage threat from China.”

FBI Director Christopher Wray
Intro:

The counterintelligence and economic espionage efforts emanating from the government of China and the Chinese Communist Party are a grave threat to the economic well-being and democratic values of the United States.

Confronting this threat is the FBI’s top counterintelligence priority.

To be clear, the adversary is not the Chinese people or people of Chinese descent or heritage. The threat comes from the programs and policies pursued by an authoritarian government.

The Chinese government is employing tactics that seek to influence lawmakers and public opinion to achieve policies that are more favorable to China.

At the same time, the Chinese government is seeking to become the world’s greatest superpower through predatory lending and business practices, systematic theft of intellectual property, and brazen cyber intrusions.

China’s efforts target businesses, academic institutions, researchers, lawmakers, and the general public and will require a whole-of-society response. The government and the private sector must commit to working together to better understand and counter the threat.

Li Chen Sentenced to Prison for Conspiring to Steal Trade Secrets, Sell Them in China

A former Dublin, Ohio, woman was sentenced in U.S. District Court today to 30 months in prison for conspiring to steal exosome-related trade secrets concerning the research, identification and treatment of a range of pediatric medical conditions.

Li Chen, 47, also conspired to commit wire fraud.

Chen admitted in her guilty plea in July 2020 to stealing scientific trade secrets related to exosomes and exosome isolation from Nationwide Children’s Hospital’s Research Institute for her own personal financial gain.

Chen and her husband, co-conspirator Yu Zhou, 50, worked in separate medical research labs at the Research Institute for 10 years each (Zhou from 2007 until 2017 and Chen from 2008 until 2018). They pleaded guilty to conspiring to steal at least five trade secrets related to exosome research from Nationwide Children’s Hospital.

Exosomes play a key role in the research, identification and treatment of a range of medical conditions, including necrotizing enterocolitis (a condition found in premature babies), liver fibrosis and liver cancer.

Court documents detail that Chen conspired to steal and then monetize one of the trade secrets by creating and selling exosome “isolation kits.” Chen started a company in China to sell the kits.

Chen received benefits from the Chinese government, including the State Administration of Foreign Expert Affairs and the National Natural Science Foundation of China. She also applied to multiple Chinese government talent plans, a method used by China to transfer foreign research and technology to the Chinese government.

“For far too long, the People’s Republic of China (PRC) has encouraged the outright theft of American trade secrets through Chinese government programs that reward researchers for stealing what China cannot produce through its own ingenuity,” said Assistant Attorney General John C. Demers for the National Security Division. “These programs, like the Thousand Talents, are not innocuous platforms for academic collaboration. Today’s conclusion of yet another successful prosecution for theft of trade secrets encouraged by the PRC Government serves as a warning to all who might seek to profit from China’s illicit efforts to achieve technological dominance through thievery.”

“Chen and her husband executed a scheme over the course of several years to set up businesses in China, steal American research and profit from doing so,” said U.S. Attorney David M. DeVillers for the Southern District of Ohio. “Chen willingly took part in the Chinese government’s long-term efforts to steal American intellectual property. She deserves time in federal prison.”

“A hospital’s most important mission is to help people live longer and healthier lives. The defendant’s mission, however, was to steal trade secrets and create a company in China to make money off those stolen trade secrets,” said Assistant Director Alan E. Kohler Jr. of the FBI’s Counterintelligence Division. “The FBI will not stop its efforts to identify people who steal technology for their own financial benefit or for the benefit of a foreign government.”

“Chen’s sentencing today is a recognition of the seriousness of this offense,” said Special Agent in Charge Chris Hoffman of the FBI’s Cincinnati Division. “Chen admitted to abusing the trust of Nationwide Children’s Hospital by stealing cutting-edge research to establish a company in China for her own financial gain. This sentence should serve as a deterrent to anyone else committing similar acts that the FBI will work closely with our partners to ensure the United States remains a world leader in science and technology innovation.”

Chen will forfeit approximately $1.25 million, 500,000 shares of common stock of Avalon GloboCare Corp. and 400 shares of common stock of GenExosome Technologies Inc. As part of her sentence, she was ordered to pay $2.6 million in restitution.

Chen and Zhou were arrested in California in July 2019 and their case was unsealed in August 2019 when they appeared in federal court in Columbus. Zhou has also pleaded guilty and awaits sentencing.

The FBI Cincinnati Division investigated the case. Assistant U.S. Attorneys S. Courter Shimeall, Peter K. Glenn-Applegate, Special Assistant U.S. Attorney J. Michael Marous and National Security Division Trial Attorney Matthew J. McKenzie, are representing the United States in this case.

in January, FBI Boston Kristen Setera Reported:

It has become much too commonplace that the ruling Communist Party of China thinks it can conduct illegal activity, and bend people here in the United States to its will, in order to try and surpass our country as the world’s leading superpower.

Earlier this morning, we arrested Massachusetts Institute of Technology (MIT) Professor Gang Chen at his home in Cambridge, Massachusetts. Immediately after we took Chen into custody, we initiated the execution of three search warrants: one at his home and two others at MIT.

Our investigation found Chen was working with the Chinese Communist Government in various capacities dating back to 2012, at our country’s expense. And the real victims in this case are you—the taxpayers—who we believe he knowingly and willfully defrauded out of $19 million in federal grants by exploiting our system to enhance China’s research in nanotechnology.

In applying for these scarce federal grants, we allege Chen failed to disclose that he was acting as an “overseas expert” on science and technology for the Chinese Communist Government—after China’s Consulate Office in New York asked him to provide expertise and advice—in exchange for financial compensation and awards.

Through an extensive document review, we found Chen has accepted approximately $29 million in foreign funding, primarily from entities tied to the Chinese Communist Government. And through a variety of Chinese talent plans, Chen received at least $355,000 for his services and expertise; money which he never disclosed to MIT or the federal government.

We also believe he committed tax fraud by failing to file a foreign bank account report, disclosing that he had a bank account in China with at least a $25,000 balance in which he kept money paid to him by various entities in China, with ties to the Chinese government.

Additionally, while Chen was chair of MIT’s Department of Mechanical Engineering, and serving as an overseas advisor, we believe he even went as far as recommending several students to participate in various Chinese talent programs. And while serving as an advisor to the China Scholarship Council—he recommended several students to receive the “Chinese Government Award for Outstanding Students Abroad.”

The cutting-edge research and technologies that are being developed here in Massachusetts must be carefully protected from our foreign adversaries and the FBI will continue to do everything it can to safeguard these important innovations.

To put this threat into perspective, we have now reached the point where the FBI is opening a new China-related counterintelligence case about every 10 hours. And of the 5,000 active counterintelligence cases the FBI has, nearly half of them are related to China. Each and every one of our field offices—including the Boston Division—have active investigations. And what needs to be made clear is that the Chinese Communist Government doesn’t play by the same rules of academic integrity and freedom that we do.

We know they use some Chinese students in the U.S. as non-traditional collectors to steal our intellectual property. We know that through their “Thousand Talents Plan” and similar programs, they try to entice researchers at our universities to bring their knowledge to China—even if that means stealing proprietary information or violating export controls or conflict-of-interest policies to do so.

We also know they support the establishment of institutes on our campuses that are more concerned with promoting Communist Party ideology than independent scholarship. They try to pressure Chinese students to self-censor their views while studying here, and they use campus proxies to monitor both U.S. and foreign students and staff. And we know they use financial donations as leverage, to discourage American universities from hosting speakers with views the Chinese Communist Government doesn’t like.

But let me be clear: We are not suggesting that all, or even most, Chinese students, professors, and researchers are somehow up to no good. There is no question that we benefit greatly from foreign researchers in our academic institutions. However, some of them are exploiting this collaborative environment, as illustrated by this case, and it needs to stop.

We want our academic and private sector partners to reach out to us if they see something that concerns them. We’re going to keep working to build trusted relationships with them, so that they know—with confidence—that we’re here to help.

I’d like to thank the agents and analysts from all the respective agencies standing before you today who worked incredibly hard on this investigation, as well as U.S. Attorney Lelling and his prosecutors for their continued partnership and support. This was truly a team effort.