Xuehua (Edward) Peng, Chinese Spy Sentenced to 4 Years for SD Card Dead Drops
March 23, 2020
Xuehua (Edward) Peng a/k/a Edward Peng was sentenced today to 48 months in prison and ordered to pay a $30,000 fine for acting as an agent of the People’s Republic of China’s Ministry of State Security (MSS) in connection with a scheme to conduct pickups known as “dead drops” and transport Secure Digital (SD) cards from a source in the United States to the MSS operatives in China. The sentence was handed down by the Honorable Haywood S. Gilliam, Jr., U.S. District Judge.
Peng pleaded guilty to the charge on November 25, 2019. According to his plea agreement, Peng, a 56 year-old U.S. citizen living in Hayward, Calif., acted at the direction and under the control of MSS officials in China in retrieving information passed to him and leaving money behind for the source. Peng admitted that in March of 2015, an official from the People’s Republic of China (PRC) introduced himself to Peng while Peng was on a business trip to China. The official asked Peng to use his citizenship in the United States to assist the official with matters of interest to the PRC. Peng eventually came to understand that the official was employed as an intelligence or security services officer of the PRC, specifically of the Ministry of State Security (“MSS”), and nevertheless agreed to perform activities in the United States on behalf of the PRC. Peng’s plea acknowledged that he knew he was acting on behalf of the government of the PRC.
“Today Xuehua Peng suffers the consequences of acting in the United States at the direction of a foreign government,” said U.S. Attorney Anderson. “This day of reckoning comes from Peng’s decision to execute dead drops, deliver payments, and personally carry to Beijing, China, secure digital cards containing classified information related to the national security of the United States. Peng will now spend years in prison for compromising the security of the United States.”
“This case exposed one of the ways that Chinese intelligence officers work to collect classified information from the United States without having to step foot in this country. Peng acted as an agent of the Chinese Ministry of State Security in the United States, conducting numerous dead drops here on their behalf and delivering classified information to them in China. He pled guilty and is now being held accountable for his criminal actions and his betrayal of his oath of citizenship,” said Assistant Attorney General Demers. “This case is but one example of the Chinese government’s multi-faceted espionage efforts and it both illustrates our determination to thwart those efforts and serves as a warning to other potential co-optees that we will find you and ensure you are punished.”
"This sentence serves as a powerful deterrent to both Communist China, who will continue to attempt to recruit others to act on its behalf, and those who attempt to carry out such tasks at the direction of its intelligence services” said Special Agent in Charge Bennett. “These actions are illegal and inexcusable. By working jointly with our partners, we will never stop our fight against hostile intelligence services and our determination to protect the national security of the United States should never be in doubt.”
Peng admitted that in March of 2015, he received instructions regarding how to use dead drops to exchange money for items to deliver to the PRC. Peng admitted that the official directed him to locate and reserve hotel rooms where he was to leave money and then depart for several hours. Peng was instructed to return later and retrieve small electronic storage devices that would be left for him. Thereafter, he was to fly to the PRC and deliver the retrieved devices to the PRC official. Peng never met nor interacted with the individual who left the devices for him and was instructed not to access the information was stored on the SD cards.
According to his plea agreement, Peng participated in five dead drops involving drop-offs of cash and/or pick-ups of SD cards, after a practice run in June 2015. After he participated in two dead drops in the San Francisco Bay Area between October 2015 and April 2016, Peng began making dead drops in Columbus, Georgia. After three dead drops in Georgia, Peng informed the PRC official that he wanted to resume dead drops in the San Francisco Bay Area. Peng did not complete a seventh dead drop before his arrest by federal authorities in September 2019. The dead drops described in Peng’s plea agreement are as follows:
Peng also admitted that the PRC official paid him at least $30,000 for the acts he performed as a courier for the MSS.
Federal law requires people acting within the United States on behalf of a foreign government to file with the Attorney General a notice and documentation of their activities. Peng acknowledged that he never filed with the Attorney General of the United States any notice or documentation of his actions as an agent of the People’s Republic of China or the Ministry of State Security.
Peng was charged by Information with one count of acting as an agent of a foreign government without notice to the Attorney General, in violation of 18 U.S.C. § 951. He pleaded guilty to the charge. Peng has been in custody since his arrest on September 27, 2019, and will begin serving his prison term immediately.
This case is being prosecuted by the Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California and the Counterintelligence and Export Control Section of the Department of Justice, National Security Division. The prosecution is the result of an investigation by the Federal Bureau of Investigation and Internal Revenue Service-Criminal Investigation.