Hospital Researcher Sentenced to Prison for Conspiring to Steal Trade Secrets and Sell to China

WASHINGTON – An Ohio man was sentenced yesterday to 33 months in prison for conspiring to steal exosome-related trade secrets concerning the research, identification and treatment of a range of pediatric medical conditions.

Yu Zhou, 51, of Dublin, Ohio, pleaded guilty in December 2020 to stealing scientific trade secrets related to exosomes and exosome isolation from Nationwide Children’s Hospital’s Research Institute for his own personal financial gain. Zhou also conspired to commit wire fraud.

“Yu Zhou sought to exploit U.S. taxpayer dollars intended to fund critical, life-saving research at Nationwide Children’s Hospital through the whole-sale theft of their trade secrets,” said Assistant Attorney General John C. Demers for the Justice Department’s National Security Division. “Zhou’s greed was encouraged and enabled by a series of Chinese Government programs which incentivize thievery in an attempt to supplement China’s own research and development goals on the back of American ingenuity and investment. This successful prosecution should serve as a warning to anyone who seeks to profit from pilfering hard-earned U.S. trade secrets.”

“Yu Zhou willingly took part in the Chinese Government’s long-term efforts to steal American intellectual property,” said Acting U.S. Attorney Vipal J. Patel for the Southern District of Ohio. “Zhou and his wife executed a scheme over the course of several years to set up businesses in China, steal American research, and profit from doing so. The couple deserves the time it received in federal prison.”

According to court documents, Zhou and his co-conspirator and wife, Li Chen, 48, worked in separate medical research labs at the Research Institute for 10 years each (Zhou from 2007 until 2017 and Chen from 2008 until 2018). They pleaded guilty to conspiring to steal at least five trade secrets related to exosome research from Nationwide Children’s Hospital. Chen was sentenced in February to 30 months in prison for her role in the scheme.

Exosomes play a key role in the research, identification and treatment of a range of medical conditions, including necrotizing enterocolitis (a condition found in premature babies), liver fibrosis and liver cancer.

Court documents detail that Zhou and Chen conspired to steal and then monetize one of the trade secrets by creating and selling exosome “isolation kits.” Zhou’s research at Nationwide Children’s included a novel isolation method in which exosomes could be isolated from samples as small as one drop of blood. This method was vital to the research being conducted in Zhou’s lab – because necrotizing enterocolitis is a condition found primarily in premature babies, only small amounts of fluid can safely be taken from them.

Zhou and Chen started a company in China to sell the kits.

The defendants received benefits from the Chinese government, including the State Administration of Foreign Expert Affairs and the National Natural Science Foundation of China. Zhou and Chen were also part of application processes related to multiple Chinese government programs, including talent plans, a method used by China to transfer foreign research and technology to the Chinese government.

As part of their convictions, the couple will forfeit approximately $1.45 million, 500,000 shares of common stock of Avalon GloboCare Corp. and 400 shares of common stock of GenExosome Technologies Inc. They were also ordered to pay $2.6 million in restitution.

Chen and Zhou were arrested in California in July 2019 and their case was unsealed in August 2019 when they appeared in federal court in Columbus.

Acting U.S. Attorney Vipal J. Patel for the Southern District of Ohio; Assistant Attorney General John C. Demers for the National Security Division; and Special Agent in Charge Chris Hoffman of the FBI’s Cincinnati Division announced the sentence imposed today by U.S. District Judge Sarah D. Morrison.

National Security Division Trial Attorney Matthew J. McKenzie, Assistant U.S. Attorneys S. Courter Shimeall, Peter K. Glenn-Applegate, and Special Assistant U.S. Attorney J. Michael Marous are representing the United States in this case.