It started with a backpack containing $10,000 in cash, quietly concealed inside a recreational center locker in suburban Livermore, California.
Thousands of miles away across the Pacific, two men coordinated the handoff without ever entering the facility.
That locker drop served as the opening move in a multiyear Chinese espionage operation that ultimately penetrated the ranks of the U.S. military. Two Chinese nationals behind the scheme, Liren “Ryan” Lai, 40, and Yuance Chen, 39, each received sentences of 30 months in federal prison followed by three years of supervised release. Both had pleaded guilty to conspiring and acting as unregistered foreign agents for the People’s Republic of China.
Federal court records document a steady escalation in classic spycraft directed by China’s primary civilian intelligence arm, the Ministry of State Security. By May 2021, Lai had recruited Chen into the operation, initially serving as the intermediary between Chen and Chinese intelligence handlers before Chen began receiving operational assignments directly from the agency.
By 2022, the mission had expanded well beyond moving money. Operating on U.S. soil, Chen began conducting surveillance of American military installations. Armed with a camera, he photographed Naval Base Kitsap in Bremerton, Washington, a major homeport for the Pacific Fleet’s nuclear-powered submarines. In Southern California, Chen monitored a Navy recruiting center, capturing video footage and photographs of active-duty sailors and young recruits entering the facility.
Behind the scenes, Chen assembled dossiers on American service members, documenting personal identifying details to assist Beijing in identifying individuals vulnerable to recruitment.
Operational ties deepened in March 2023 when Lai flew from China to the United States to deliver a dedicated mobile device to Chen. Chen referred to the device in communications as a “state secret,” intended exclusively for covert contact with their handlers. Chen subsequently traveled to China in 2024 and again in 2025, meeting directly with intelligence officers to receive new assignments targeting American military personnel.
By the spring of 2025, Chinese handlers dispatched Lai back to the United States to facilitate another transaction. In May, the agency directed him to travel to Phoenix to coordinate a second clandestine dead-drop payment, this time involving approximately $20,000 in cash.
The operation unraveled weeks later. On June 27, 2025, a joint counterintelligence operation led by the FBI and the Naval Criminal Investigative Service moved in, arresting both men. A grand jury in San Francisco issued an indictment days later. Lai entered a guilty plea on December 12, 2025, and Chen followed on February 20.
“Liren Lai and Yuance Chen operated in a long-running scheme to undermine U.S. national security by supporting Chinese intelligence operations and recruiting in the United States,” said Assistant Attorney General for National Security John A. Eisenberg. “Lai’s and Chen’s activities, undertaken at the direction of the PRC, were extensive and brazen. The National Security Division is committed to holding accountable anyone who aids or abets such espionage efforts.”
Roman Rozhavsky, assistant director of the FBI’s Counterintelligence and Espionage Division, emphasized that the case reflects an ongoing effort by foreign intelligence services to infiltrate American defense installations.
“By their own admission, Chen and Lai operated as illegal agents for the Chinese government on U.S. soil, carrying out clandestine intelligence work that included making covert payments, collecting sensitive military information, and attempting to recruit American service members,” Rozhavsky said. “The Chinese government’s efforts to infiltrate our armed forces demonstrate just how far it will go to threaten U.S. national security, but it has underestimated the FBI’s commitment to thwarting its illegal activity and holding its agents accountable. Let this sentencing serve as a clear warning: If you attempt to jeopardize the safety and security of our service members, our citizens, or our nation, justice will find you.”
The San Francisco FBI field office directed the investigation alongside NCIS, drawing operational support from federal field offices and prosecutors across Oregon, Washington, Southern California, and Texas.
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