PORTLAND, Ore. — Federal agents delivered a stunning blow to Chinese espionage operations on American soil Friday, arresting two Chinese nationals accused of running a sophisticated spy network targeting U.S. Navy personnel and military installations on behalf of Beijing’s Ministry of State Security.
The dramatic arrests of Yuance Chen, 38, in Happy Valley, Oregon, and Liren “Ryan” Lai, 39, in Houston, Texas, exposed what authorities describe as a years-long intelligence operation involving dead drops, cash payments, and attempts to recruit American service members as foreign assets.
High-Stakes Espionage Operation Exposed
The criminal complaint unsealed Monday reveals a chilling picture of modern espionage, complete with Hollywood-style tradecraft. Chen, a legal permanent U.S. resident, and Lai, who entered the country on a tourist visa in April, allegedly orchestrated clandestine activities that included:
- Dead drop cash payments of at least $10,000 left in backpacks at California recreational facilities
- Intelligence gathering on U.S. Navy bases and recruitment centers
- Active recruitment efforts targeting American military personnel
- Covert meetings with Chinese intelligence officers in Guangzhou
The operation represents what federal officials call “the Chinese government’s sustained and aggressive effort to infiltrate our military and undermine our national security from within.”
Top Officials Sound the Alarm
Attorney General Pamela Bondi delivered a forceful response to the arrests, declaring that “the Justice Department will not stand by while hostile nations embed spies in our country.” She emphasized the government’s commitment to exposing foreign operatives and protecting Americans from covert national security threats.
FBI Director Kash Patel highlighted the sophisticated nature of the Chinese operation, noting that “the Chinese Communist Party thought they were getting away with their scheme to operate on U.S. soil, utilizing spy craft, like dead drops, to pay their sources.”
The case involved a massive coordinated effort across multiple FBI field offices, including San Francisco, Portland, Houston, and San Diego, working alongside the agency’s Counterintelligence Division.
Years-Long Recruitment and Training Scheme
According to federal prosecutors, the spy network’s origins trace back to 2021, when Lai allegedly recruited Chen to work for China’s Ministry of State Security (MSS) — the country’s primary civilian intelligence agency responsible for foreign espionage and counterintelligence operations.
The partnership quickly escalated into active operations. In January 2022, while Lai was in Guangzhou, China, the pair coordinated a sophisticated dead drop operation in Livermore, California, where they arranged for a backpack containing at least $10,000 in cash to be left at a day-use locker at a recreational facility.
Targeting America’s Naval Forces
Following the successful cash drop, Chen allegedly expanded his activities to include direct intelligence gathering on U.S. naval installations. His assignments included:
2022-2023 Reconnaissance Missions:
- Visiting a U.S. Naval installation in Washington State
- Infiltrating a Navy recruitment center in San Gabriel, California
- Collecting personal information on military recruits
- Transmitting sensitive data to MSS officers in China
The complaint reveals that Chen received detailed instruction from Chinese intelligence on recruitment techniques and methods to avoid detection. He eventually began contacting a Navy employee through social media, providing information about the individual to his MSS handlers.
International Travel and Handler Meetings
Chen’s commitment to the espionage operation extended to international travel for face-to-face meetings with his Chinese handlers. Federal prosecutors allege he traveled to Guangzhou for in-person meetings with MSS intelligence officers in April 2024 and March 2025 to discuss compensation and receive new assignments.
Meanwhile, Lai’s April 2025 trip to Houston under the guise of business activities raised red flags with investigators. Though claiming he would stay two weeks for online retail business, Lai remained in the United States for over a month, taking a suspicious cross-country road trip through New Mexico and Arizona to Southern California before returning to Texas.
Naval Criminal Investigative Service Speaks Out
Director Omar Lopez of the Naval Criminal Investigative Service (NCIS) emphasized the serious nature of the threat, stating that “the PRC has for years attempted through various means to recruit U.S. service members as intelligence assets due to their access to sensitive military information.”
NCIS and the Department of the Navy have committed to continuing their efforts to “root out any attempts to compromise the DON’s critical warfighting and shipbuilding capabilities.”
Serious Federal Charges
Both defendants face charges under Title 18, Section 951 of the U.S. Code for operating as agents of a foreign government without proper notification to the Attorney General. If convicted, each could face:
- Maximum fine: $250,000
- Maximum prison term: 10 years
The case is being prosecuted by the National Security and Special Prosecutions Section of the U.S. Attorney’s Office for the Northern District of California, working closely with the National Security Division’s Counterintelligence and Export Control Section.
Broader Context of Chinese Intelligence Operations
The arrests highlight the scope of Chinese intelligence activities targeting the United States. According to the criminal complaint, China’s Ministry of State Security conducts extensive intelligence operations seeking information on American political, economic, and security policies, along with military, scientific, and technical data of strategic value.
Assistant Attorney General for National Security John A. Eisenberg noted that “adverse foreign intelligence services like the PRC’s Ministry of State Security dedicate years to recruiting individuals and cultivating them as intelligence assets to do their bidding within the United States.”
Multi-Agency Coordination
The successful operation demonstrates unprecedented coordination among federal agencies. The FBI San Francisco Field Office led the investigation with crucial support from field offices in Portland, Houston, and San Diego. NCIS provided valuable operational assistance, while prosecutors from multiple federal districts collaborated on the case.
U.S. Attorney Craig H. Missakian for the Northern District of California emphasized his office’s commitment to counterespionage efforts, stating they “will continue to undertake counterespionage investigations and prosecutions, no matter how complex and sensitive, to disrupt attempts to weaken our national security.”
Legal Proceedings Continue
Both defendants made their initial court appearances Monday — Chen in Portland federal court and Lai in Houston. As the case moves forward, it serves as a stark reminder of ongoing foreign intelligence threats operating on American soil.
Federal officials stress that these arrests represent just one facet of broader efforts to combat foreign espionage, with investigations continuing across multiple agencies to identify and neutralize additional threats to national security.
