The US State Department on 19 October 2026 announced sanctions on five China-based entities under the Protecting American Intellectual Property Act, in connection with theft of trade secrets from US persons. They include Shanghai Zhisuan Technology, a startup established in 2023 by former Google engineer Linwei Ding, and the venture capital firm MiraclePlus, which the department said gave Zhisuan seed capital in exchange for an ownership stake.
The other three are Beijing Qiji Chuangtan Phase I and Phase II, two venture capital funds managed by MiraclePlus, and Beijing Qiji Chuangtan Zhiyuan Enterprise Management Center, an entity wholly owned by Phase I, according to the State Department fact sheet. The Wall Street Journal reported the action under the headline “U.S. Sanctions Chinese AI Startup Founded by Ex-Google Employee.”
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The key insight: As we read it, the State Department’s action reaches past the founder to the money behind the startup: four of the five designated entities are MiraclePlus or entities it manages, owns or controls, by our count from the fact sheet.
The fact sheet says Zhisuan was “marketed as capable of developing a softwareplatform that could accelerate machine learning workloads, including training large super intelligence (SI) models powered by supercomputing chips.”
According to the department, Ding applied on behalf of Zhisuan to a China-based startup incubation program known as MiraclePlus, “touting his experience with and knowledge of Google’s technology and internal systems and claiming that Zhisuan could replicate Google’s SI infrastructure technology.”
The department describes MiraclePlus as a China-based venture capital firm that invests primarily in Chinese tech startups and holds two startup camps a year. It says Ding used the stage MiraclePlus provided to present Zhisuan and to tout his ability to replicate Google’s technology “to fit China’s national conditions.”
Who is behind MiraclePlus: Bloomberg reported on 20 October that Washington has blacklisted a Chinese venture firm “established by ex-Microsoft Corp. AI scientist Lu Qi for alleged ties to a startup accused of stealing technology” from Google, and described MiraclePlus as “the successor to a Chinese program run by Silicon Valley’s Y Combinator.” Y Combinator’s own 2019 post says Qi Lu joined it in 2018 to help create YC China and would “fund companies under his new program, MiraclePlus.” The designations rest on the State Department’s allegations; the part of Bloomberg’s report we could read cites no court finding against MiraclePlus or Lu.
Sentencing positions in the Linwei Ding case, in months, bars to scale: prosecutors sought 70 months, the court imposed 12 months minus one day on 1 September 2026, probation recommended up to six months and the defence asked for three months’ home confinement (Courthouse News). On 19 October 2026 the State Department sanctioned five entities, including Ding’s startup Zhisuan and the venture firm MiraclePlus.
What Was Posted on X
The United States is sanctioning five entities under the Protecting American Intellectual Property Act in connection with the theft of American trade secrets.
Safeguarding American innovation fuels economic growth, enhances technological progress, and protects Americans.
The State Department spokesperson posted on 19 October 2026 that the United States is sanctioning five entities under the Protecting American Intellectual Property Act in connection with the theft of American trade secrets. The post names no company; the fact sheet the piece quotes lists the five, led by Zhisuan and MiraclePlus.
Bloomberg (@business) posted at 07:35 UTC on 20 October that Washington has blacklisted a Chinese venture firm established by ex-Microsoft AI scientist Lu Qi, for alleged ties to a startup accused of stealing technology from Google. The firm is MiraclePlus, one of the five entities in the State Department fact sheet; the allegations are the department’s.
The Legal Basis
The fact sheet says Zhisuan “has knowingly engaged in, or benefitted from, significant theft of trade secrets of United States persons, which occurred on or after January 5, 2023.” It says MiraclePlus provided “significant financial, material, or technological support” for such theft, and that the three other entities are owned or controlled by MiraclePlus or act for it.
The act, signed into law in January 2023, mandates sanctions against certain foreign persons that engage in or benefit from significant theft of US trade secrets, the department says. It lists the sanctions applied as those in Section 2(b)(1)(A), (D), (H), (I) and (J) of the statute, and points people seeking removal to its delisting guidance.
The Treasury’s Office of Foreign Assets Control listed “Protecting American Intellectual Property Act of 2022 (PAIPA) Designations” among its 19 October recent actions. The State Department spokesperson wrote on X that the United States is sanctioning five entities “in connection with the theft of American trade secrets.”
The Criminal Case Behind the Startup
Google hired Ding in 2019 as a software engineer to help develop its supercomputing data centers, Courthouse News reported. The government said he transferred and downloaded 1,255 internal Google documents, an estimated 14,000 pages, between the spring of 2022 and 2023.
A San Francisco jury found Ding guilty of all 14 counts of theft of trade secrets and economic espionage after a two-week trial in January, according to Courthouse News. In June, US District Judge Vince Chhabria declined to acquit him on the trade secret counts.
On 20 August, the judge threw out the seven economic espionage convictions, finding insufficient evidence that Ding intended to benefit the Chinese government when he uploaded the documents, Courthouse News reported. On 1 September, Chhabria sentenced him to 12 months minus one day in prison, two years of supervised release, more than $198,000 in restitution to Google and a $2,500 fine; the government had sought 70 months.
Ding’s lawyer indicated he would appeal the sentence, Courthouse News reported. The State Department fact sheet does not mention the court case.
Of the five designated entities, one is the startup Ding founded and four are MiraclePlus or entities it manages, owns or controls, by our count from the fact sheet.
The sentence of 12 months minus one day is about 17 percent of the 70 months the government sought, our arithmetic from Courthouse News’ figures. The probation office had recommended a sentence of up to six months, and Ding’s lawyer had asked for three months’ home confinement, Courthouse News reported.
The Structural Read
As we read it, the fact sheet ties the sanctions to how Zhisuan was pitched: the department says Ding told MiraclePlus that Zhisuan could replicate Google’s SI infrastructure technology.
As we read it, the designations come seven weeks after Ding was sentenced on 1 September; the fact sheet does not mention the court case, and Ding’s lawyer indicated he would appeal, Courthouse News reported.
As we read it, the sentence and the request differ: by our arithmetic, 12 months minus one day is about 17 percent of the 70 months prosecutors sought.
US State Department fact sheet, 19 October 2026
“touting his experience with and knowledge of Googleโs technology and internal systems and claiming that Zhisuan could replicate Googleโs SI infrastructure technology”
Three Implications
THE INVESTOR IS NAMED TOO The department says MiraclePlus gave Zhisuan seed capital in exchange for an ownership stake, and it designated two MiraclePlus funds and an entity owned by one of them.
THE LEGAL BASIS IS PAIPA The fact sheet applies the sanctions in Section 2(b)(1)(A), (D), (H), (I) and (J) of the Protecting American Intellectual Property Act.
THE COURT CASE IS STILL MOVING Ding’s lawyer indicated he would appeal the sentence, Courthouse News reported.
The framework puts it this way: “It’s a fundamental constraint on the speed of AI transformation, and it’s creating geopolitical leverage that operates independently of who has the best models.”
As we read it, the 19 October designations sit on the infrastructure side of that idea: the fact sheet describes a startup marketed to accelerate machine learning workloads on supercomputing chips, founded by an engineer Google hired to help develop its supercomputing data centers, per Courthouse News. The framework was published in December 2025 and does not discuss this case.
What Is Not Established
The fact sheet does not say what assets the five entities hold in the United States, if any, or whether any of them responded. It does not name the trade secrets or the US persons whose secrets were taken.
We could not read the Wall Street Journal’s article beyond its headline, and we did not find a response from Zhisuan, MiraclePlus or Ding to the designations.
This Week In The AI Supercycle
Execution Fault Lines, Concentrated Demand, and Geopolitical Firewalls
This piece is part of this week’s issue: the AI build is not short of demand for its parts. It is short of cheap money, and its end revenue rests on a narrow base of large, often venture-funded buyers.
The US State Department on 19 October 2026 designated five China-based entities under the Protecting American Intellectual Property Act: Shanghai Zhisuan Technology, which former Google engineer Linwei Ding established in 2023, and the venture firm MiraclePlus, which the department said took an ownership stake in it, plus three MiraclePlus funds and entities. A jury convicted Ding in January of stealing Google trade secrets, and he was sentenced on 1 September to 12 months minus one day, Courthouse News reported.
A note on sourcing. This piece is built on the US State Department’s 19 October 2026 fact sheet, read in full, OFAC’s recent-actions page and the department spokesperson’s post on X. The case history is from Courthouse News’ 20 August and 1 September 2026 reports, read in full. We could read only the headline of the Wall Street Journal’s article. The Lu Qi detail is from Bloomberg’s 20 October report (its opening paragraphs, the part we could read) and Y Combinator’s 2019 post on YC China. The counts and the ratio are ours. Nothing here is a forecast, and nothing here is financial or investment advice.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
