Chen and Lai were arrested on June 27, 2025, by the FBI in Happy Valley, Oregon, and Houston Texas, as part of a coordinated counterintelligence and law enforcement operation across multiple states.
“This case underscores the Chinese government’s sustained and aggressive effort to infiltrate our military and undermine our national security from within,” said Attorney General Pamela Bondi. “The Justice Department will not stand by while hostile nations embed spies in our country – we will expose foreign operatives, hold their agents to account, and protect the American people from covert threats to our national security.”
“The FBI arrested two Chinese nationals who were allegedly attempting to recruit U.S. military service members on behalf of the PRC,” said FBI Director Kash Patel. “The Chinese Communist Party thought they were getting away with their scheme to operate on U.S. soil, utilizing spy craft, like dead drops, to pay their sources. This case was a complex, coordinated effort and is an example of outstanding counterintelligence work done by FBI San Francisco, Portland, Houston, San Diego, and the Counterintelligence Division. The FBI will continue to vigilantly defend the homeland from China’s pervasive attempts to infiltrate our borders.”
“Adverse foreign intelligence services like the PRC’s Ministry of State Security dedicate years to recruiting individuals and cultivating them as intelligence assets to do their bidding within the United States,” said Assistant Attorney General for National Security John A. Eisenberg. “Under my leadership, the National Security Division will continue to defend our nation and neutralize our adversaries’ clandestine spy networks.”
“These charges reflect the breadth of the efforts by our foreign adversaries to target the United States — this time by conducting illegal intelligence-gathering operations aimed at our national security information and military service members,” said U.S. Attorney Craig H. Missakian for the Northern District of California. “My office and the FBI remain ever vigilant in guarding against these threats to the United States. We will continue to undertake counterespionage investigations and prosecutions, no matter how complex and sensitive, to disrupt attempts to weaken our national security.”
“NCIS and the Department of the Navy take the foreign intelligence gathering threat very seriously, as the PRC has for years attempted through various means to recruit U.S. service members as intelligence assets due to their access to sensitive military information,” said Director Omar Lopez of the Naval Criminal Investigative Service (NCIS). “NCIS and the Department of the Navy (DON) remain committed to working together to root out any attempts to compromise the DON’s critical warfighting and shipbuilding capabilities.”
As alleged in the criminal complaint unsealed yesterday, the PRC Government conducts intelligence activities against the United States through multiple arms, including the MSS. The MSS handles civilian intelligence collection for the PRC and is responsible for counterintelligence and foreign intelligence, as well as political security. The MSS and its bureaus seek to obtain information on political, economic, and security policies that might affect the PRC, along with military, scientific, and technical information of value to the PRC. The MSS and its bureaus are tasked with conducting clandestine and covert human source operations, of which the United States is a principal target.
As alleged in the criminal complaint, Lai recruited Chen to work on behalf of the MSS in or about 2021. While in Guangzhou, China, in January 2022, Lai and Chen worked together to facilitate a dead-drop payment of at least $10,000 on behalf of the MSS, working with other individuals located in the United States to leave a backpack with the cash at a day-use locker at a recreational facility located in Livermore, California.
Following the January 2022 dead drop, Lai and Chen continued to work on behalf of the MSS, including by attempting to help identify potential assets for MSS recruitment within the ranks of the U.S. Navy. For example, in 2022 and 2023, Chen was tasked by Lai to visit a U.S. Naval installation in Washington State and a U.S. Navy recruitment center in San Gabriel, California. While in the recruitment center, Chen obtained personal information for recruits that he appears to have transmitted to an MSS intelligence officer in China. The complaint also alleges that Chen received instruction from the MSS on how to engage and recruit future Sailors and methods for minimizing his risk of exposure. Eventually, Chen began contacting a Navy employee over social media and provided information about the employee to the MSS. The complaint alleges that Chen traveled to Guangzhou and met with MSS intelligence officers in April 2024 and March 2025 in order to discuss compensation and specific taskings.
The complaint also alleges that Lai traveled to Houston, Texas, in April 2025, claiming that the purpose of his visit was related to his business as an online retail seller, and that he would be staying in the Houston area for two weeks. However, on May 9, 2025 – more than four weeks after his arrival in the United States – Lai traveled by car with a companion from Houston to Southern California, via New Mexico and Tucson, Arizona, before returning to Texas, on May 15, 2025.
Chen and Lai are charged with violating Title 18, United States Code, Section 951, which makes it a crime for a person to operate or agree to operate within the United States as an agent of a foreign government without notification to the Attorney General of the United States. If convicted, the defendants face a fine of up to $250,000 and a term of imprisonment of up to 10 years.
The FBI San Francisco Field Office is leading the investigation, with valuable assistance provided by the FBI Portland, Houston, and San Diego Field Offices. NCIS also provided valuable assistance during the operation.
The National Security and Special Prosecutions Section of the U.S. Attorney’s Office for the Northern District of California and the National Security Division’s Counterintelligence and Export Control Section are in charge of the prosecution. Significant operational support and assistance is also being provided by the District of Oregon, the Southern District of Texas, and the Southern District of California.
A criminal complaint is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
