U.S. Prosecutors Indict CEO of Louisville Magnet Company for Alleged Defense Data Theft and Smuggling to China

U.S. prosecutors have indicted Hang Sun, the CEO of Louisville-based Quadrant Magnetics LLC, for allegedly sending sensitive defense-related technical data to China and selling unauthorized items to the U.S. Department of Defense (DOD). The charges, filed by the Department of Justice (DOJ) on Friday, include conspiracy, wire fraud, smuggling, and violations of the Arms Export Control Act.

Sun, a Chinese national also known as Cody Sun, became a legal permanent U.S. resident in 2015, the same year he acquired the company. The indictment claims that Sun also owned the parent company of Quadrant Magnetics in China.

Prosecutors allege that between January 2012 and December 2018, Sun conspired to illegally transmit approximately 70 technical drawings containing defense-related data to a company in China. These drawings were said to be owned by two U.S. companies and contained information critical to the production of military equipment, including systems for aviation, submarines, radar, missiles, infrared imaging, and fire control systems used by the DOD.

In addition to the data theft, Sun is accused of fraudulently selling rare earth magnets imported from China to two U.S. defense contractors. These magnets were allegedly included in components later sold to the DOD for use in military assets like the F-16 and F-18 aircraft. U.S. federal regulations require that such components be smelted and magnetized in the U.S. or an approved country, excluding China.

If convicted, Sun faces significant penalties, including up to 20 years in prison for each count of wire fraud and exporting technical data without a license. Additionally, he could face up to five years for conspiracy and 10 years for smuggling defense-related items from the United States.

Three other individuals—Phil Pascoe, Monica Pascoe, and Scott Tubbs—along with Quadrant Magnetics, were charged separately on December 5, 2023. The indictment states that Phil Pascoe and Tubbs instructed employees at Quadrant Magnetics to conceal the country of origin for the magnets.

In July 2024, District Judge David Hale in Kentucky dismissed a motion to dismiss the technical data charges, rejecting the defendants’ claim that the regulations were “unconstitutionally vague.” Judge Hale emphasized that the regulations clearly required a license for exporting technical data related to defense articles.

Quadrant Magnetics has not yet responded to inquiries regarding the case.