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Press Release

Hayward Resident Sentenced To Four Years For Acting As An Agent Of The People’s Republic of China

For Immediate Release
U.S. Attorney's Office, Northern District of California

SAN FRANCISCO – 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, announced United States Attorney David L. Anderson, Assistant Attorney General for National Security John C. Demers, and Federal Bureau of Investigation San Francisco Division Special Agent in Charge John F. Bennett. 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:



June 2015

A PRC official directs Peng to perform a dead drop at a hotel in Newark, Calif.  Peng describes this first dead drop as “practice.” The PRC official instructs Peng to retrieve a package left for him at the front desk of the hotel by an individual that Peng had not met.

October 2015

A PRC official calls Peng and directs him to participate in another dead drop at the same hotel in Newark.  On October 24, 2015, Peng goes to the hotel receptionist and retrieves a package that was left for him there. The package contains a secure digital (SD) memory card.  The next day, October 25, 2015, Peng drives to the San Francisco International Airport and flies directly to Beijing, PRC.  In Beijing, Peng meets with agents of the MSS, including the PRC official with whom Peng had been communicating, and delivers the SD card to MSS.

April 2016

A PRC official uses coded language to tell Peng that another dead drop will occur on April 23, 2016.  The official directes Peng to book a hotel room where he will conduct the exchange.  The PRC official directed Peng to leave $20,000 cash in the hotel room and that Peng be will be reimbursed for the payment.  The PRC official instructs Peng to return to the PRC on April 24, and to fly directly to Beijing, Shanghai, or Guangdong.  Peng is informed that the PRC official with whom he is communicating would meet Peng when he landed. Peng complied with the instructions.  On April 23, 2016, Peng drives to an Oakland hotel, reserves a room, and leaves a key to the room at the front desk.  Peng leaves $20,000 concealed on the underside of a dresser in the room. Hours later, Peng returns, observes that the money had been retrieved and determines that a cigarette pack with an SD card inside of it has been left for him in place of the money.  Peng travels on a direct flight from San Francisco to Beijing the next day where he meets with agents of the MSS, including the PRC official.

Late 2016 to January 2017

Peng travels to Columbus, Georgia and selects a hotel for future dead drops. Peng flies to PRC to report to MSS officers the new location.

June 30, 2017 to July 1, 2017

Peng leaves $20,000 taped to the underside of a dresser in the hotel room and leaves a key to his room at the front desk.  Returning to the hotel approximately 90 minutes later, Peng checks to ensure the money was taken, checks out of the hotel, and returns to his home in Hayward.

August 23, 2017 to September 10, 2017

The PRC official calls Peng on August 23, 2017.  The official instructs Peng in coded language to conduct a dead drop on September 9, 2017, at the Columbus hotel.  This dead drop entailed Peng leaving $10,000 in exchange for an SD card.  Peng transfers money from an account he controls in PRC to an individual who provides Peng with $10,000 in cash.  Peng travels to Columbus on September 8, 2017, and on the next day puts $10,000 cash in an envelope and tapes it to the underside of a dresser in the hotel room.  Peng leaves the room and leaves a key at the front desk.  When he returns approximately three hours later, Peng confirms that the cash had been retrieved and an SD card has been left in its place.  Peng returns home and on September 10, 2017, flies from San Jose International Airport on a nonstop flight to Beijing.  Peng meets with agents of the MSS, including the PRC official, and provides them with the SD card.

June 20, 2018 to July 2, 2018

June 20, 2018, a PRC official calls Peng with instructions regarding a third dead drop in Georgia.  The official uses coded language to instruct Peng to leave $20,000 on June 30, 2018, and retrieve an SD card.  Peng travels to the same Columbus hotel on June 29, 2018, and the next day tapes $20,000 to a dresser drawer in the hotel room.  Peng leaves a key at the front desk, returns three hours later, and finds an SD card where he had left the money.  Peng returns home and, on July 2, 2018, flies from San Francisco International Airport to Beijing to meet with agents of the MSS, including the PRC official, to whom he delivers the SD card.

August 2019 to September 27, 2019

Peng reserves a room at the same hotel in Newark, Calif., that he had used for the two dead drops in 2015. Peng prepares to leave funds and collect an SD card, however, he is later informed by the PRC official that the dead drop would be delayed.  Peng is arrested at his residence in Hayward on September 27, 2019, before the seventh dead drop is completed.

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.

Updated March 17, 2020

National Security