An anonymous reader quotes a report from The New York Times: Investigators at the Commerce Department were deep into a monthslong investigation of a Singaporean company that they suspected of smuggling Nvidia's artificial intelligence chips into China when their work came to a sudden halt late last year. The investigation centered on Megaspeed, a data center company led by an executive who U.S. officials now believe to be a Chinese spy who had a relationship with Nvidia's chief executive, Jensen Huang. But the case was abruptly transferred to the Justice Department last year. The shift came after Commerce Department investigators working on the case received an email from Nvidia's general counsel seeking information about the inquiry into Megaspeed. It is not necessarily unusual for Commerce Department agents working on a case to speak with a company's representatives about issues involving their firm. But what was unusual was the content of the message. Tim Teter, Nvidia's general counsel, said that Jeff Kessler, a top official at the department, had given Nvidia permission to reach out about the case. The agents were alarmed that Nvidia had invoked the name of Mr. Kessler, their superior, who was nominated to his role by President Trump. Some viewed Mr. Kessler's interaction with Nvidia as violating government procedure and potentially tainting the case, according to current and former government officials and others familiar with the incident. It is not clear what led to Mr. Teter's outreach to the department, but the recent revelations about Mr. Huang's acknowledged affair with a Megaspeed executive have only intensified scrutiny of Nvidia's role in influencing policy on chip sales to China. [...] The incident raised questions about what Mr. Kessler, who reports directly to Commerce Secretary Howard Lutnick, had discussed with Nvidia. It also raised the possibility that those discussions could become their own subject of inquiry. Perhaps inadvertently, some officials said, Mr. Kessler had opened himself to accusations of undue influence and potentially jeopardized his department's work on Megaspeed. The case was quickly transferred to the Justice Department in an effort to avoid any potential compromise of the government's investigation of Megaspeed, these people said. The Justice Department is conducting a criminal inquiry into Megaspeed, according to people familiar with the matter.

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