EL7.AI
GeopoliticsMedium•23 October 2026•
4 min read

Washington Sanctions 5 Chinese Entities in AI Secrets Case

Key Facts

1The United States listed 5 Chinese entities linked to the case involving former Google engineer Linwei Ding.
2U.S. financial institutions are barred from extending loans or credit totaling more than 10,000,000 dollars to any listed entity over 12 months.
3The State Department said Zixuan knowingly engaged in, or benefited from, the theft of U.S. trade secrets since January 5, 2023.
4Ding was convicted on seven counts of trade secrets theft, while the economic espionage charges included in the initial ruling were later dismissed.
5Alphabet Class A shares closed at 324.22 dollars on October 22, versus 344.18 dollars on October 19.

The U.S. Treasury Department’s Office of Foreign Assets Control added 5 Chinese entities to its sanctions list on October 19 over a trade secrets theft case involving a former Google engineer. The list included Zixuan, Merkle Plus and three other entities linked to Merkle Plus, according to the U.S. State Department and the Associated Press. The State Department said Zixuan had knowingly engaged in, or benefited from, the significant theft of trade secrets belonging to U.S. persons since January 5, 2023. Washington imposed the action under the Protecting American Intellectual Property Act of 2022, with the State Department announcing the decision and Treasury issuing two related general licenses. The sanctions broaden the case from an AI company to a funding source and associated companies, imposing specific financial restrictions on the listed entities.

The State Department said Merkle Plus provided initial funding to Zixuan in exchange for an ownership stake, and that the three other entities covered by the sanctions were linked to it. But Merkle Plus denied investing in Zixuan, according to Bloomberg, putting Washington’s account at odds with the company’s denial. The sanctions also target the listed entities’ ability to access financing from U.S. financial institutions. Under the Office of Foreign Assets Control’s rules, those institutions are barred from extending loans or credit totaling more than 10,000,000 dollars to any entity over a 12-month period. The cap sets out one direct aspect of the restrictions, alongside a ban on transactions involving the property and interests of the listed entities. Treasury issued a second general license allowing the wind-down of certain transactions involving entities that were blocked on October 19.

The case is based on U.S. allegations against Linwei Ding, Zixuan’s founder and a former Google engineer. The State Department said Ding boasted of his Google experience and claimed his company could replicate the U.S. company’s artificial intelligence supercomputing infrastructure technology. In a Justice Department statement, authorities said the copied information included AI trade secrets, including processor chip architecture, the software that runs them, and the coordination of thousands of chips in a supercomputer to train and run AI models. The department said Ding copied more than 2,000 pages of confidential Google information between about May 2022 and April 2023. It also said he pitched investors on his ability to build an AI supercomputer by copying and modifying Google technology. Washington links these allegations to the listing of the company Ding founded and entities it said funded or were associated with it.

In the court case, a federal jury convicted Ding on January 30, 2026, of seven counts of economic espionage and seven counts of trade secrets theft, according to the Justice Department. But the Associated Press reported that a judge later dismissed the economic espionage charges and sentenced Ding to 12 months in prison. The agency said the Justice Department is appealing the dismissal of those charges. That means the conviction reported by the Justice Department also included trade secrets theft charges, while the dismissal of the economic espionage charges remained under appeal. Treasury’s sanctions come amid the broader case but are separate from the criminal sentence imposed on Ding. The appeal leaves the economic espionage charges on an unresolved legal track, according to the report.

Beijing expressed opposition to the sanctions the day after they were imposed, with China’s Commerce Ministry saying the move seriously harmed the legitimate rights and interests of Chinese companies. The ministry added that Beijing would take “necessary measures” in response, without specifying their nature. China’s response sets its official position directly against Washington’s allegations of the purported theft of U.S. trade secrets. In the market, Alphabet Class A shares closed at 324.22 dollars on October 22, compared with 344.18 dollars on October 19. The shares had closed at 340.59 dollars on October 16. The price path does not link the share movement to the sanctions; the report offers no explanation for the move or attribution of the decline to the decision.