Chinese Researcher Sentenced to 30 Months in Prison for Stealing Trade Secrets

Exterior view of Nationwide Children's Hospital in Colombus, Ohio. Nationwide Children's Hospital/CC BY-SA 2.0 via Flickr

A Chinese researcher was sentenced to 30 months in prison on Feb. 1 for conspiring to steal U.S. trade secrets and make a profit in China.

Chen Li, 47, a former resident of Dublin, Ohio, worked at the Ohio-based Research Institute at the Nationwide Children’s Hospital from 2008 until 2018. Her husband, Zhou Yu, 50, worked at a different medical research lab at the same hospital from 2007 until 2017.

In 2015, they founded a biotech company in China, which sold exosome “isolation kits” based on exosome-related trade secrets stolen from the hospital—without the hospital’s knowledge.

Beijing GenExosome was the name of the China-based company the couple set up. The company was eventually acquired in October 2017 by GenExosome Technologies, a subsidiary of the New Jersey-based biotech firm Avalon GloboCare Corp.

Exosomes are small sacs containing nucleic acid and proteins and play an important role in cell-to-cell communication. They have been found to be important in the treatment of multiple diseases, such as liver cancer, liver fibrosis, and an intestinal disease called necrotizing enterocolitis that affects premature infants, as well as tissue regeneration therapy.

According to the indictment, the couple received funding from various Chinese government entities, including the National Natural Science Foundation of China, an institution administered under China’s cabinet-like State Council; and China’s State Administration of Foreign Expert Affairs, an agency responsible for recruiting foreigners.

Chen also applied to multiple Chinese talent plans, which according to the Department of Justice (DOJ), are “a method used by China to transfer foreign research and technology to the Chinese government.”

The couple was arrested in California in July 2019 and subsequently charged. In July 2020, Chen pleaded guilty to charges of stealing trade secrets and wire fraud. Zhou pleaded guilty to similar charges in December last year and now awaits sentencing.

“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,” stated U.S. Attorney David M. DeVillers for the Southern District of Ohio, in a DOJ press release.

He added: “Chen willingly took part in the Chinese government’s long-term efforts to steal American intellectual property. She deserves time in federal prison.”

As part of her sentence, Chen was also ordered to pay $2.6 million in restitution. She will also forfeit about $1.25 million, 500,000 shares of common stock in Avalon GloboCare Corp., and 400 shares of common stock in Avalon’s subsidiary GenExosome Technologies.

According to a report by Columbus Business First, Zhou was named co-CEO of the U.S. subsidiary in 2017. But he was fired from the company in August 2019, about a month after he was indicted.

“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.

He added: “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.”

The Thousand Talents Plan, which Beijing rolled out in 2008,  is one of many talent recruitment programs the Chinese regime has maintained for decades, to attract overseas Chinese and foreign experts into working for China’s science and tech sectors.

Through these programs, Beijing hopes to quickly turn China into an industrial and innovation powerhouse and transform its military to rival that of the United States.