Ohio researcher pleads guilty to plotting to steal trade secrets and sell them in China

Yu Zhou, right, and his wife Li Chen, left, plead guilty for trying to steal medical trade secrets.

A man pleaded guilty in U.S. District Court Dec. 11 to conspiring to steal exosome-related trade secrets concerning the research, identification and treatment of a range of pediatric medical conditions.

Yu Zhou, 50, also pleaded guilty to conspiring to commit wire fraud. His wife, Li Chen, pleaded guilty in September. They are both former residents of Dublin, Ohio.

Zhou admitted to conspiring to steal scientific trade secrets related to exosomes and exosome isolation from Nationwide Children’s Hospital’s Research Institute for his own personal financial gain in China.

“China’s endemic efforts to rob, replicate and replace products that they do not have the ability to develop themselves will not go unchecked, and those who seek to profit from the theft of trade secrets will be held accountable.” said John C. Demers, Assistant Attorney General for National Security. 

“The Chinese government has created a large-scale, sophisticated system to steal American ingenuity,” U.S. Attorney David M. DeVillers said. “We hope this conviction demonstrates that we will fight this system.”

“Zhou and his wife have both accepted responsibility for establishing a company in China to personally profit from the cutting-edge work done at Nationwide Children’s Hospital,” stated FBI Cincinnati Special Agent in Charge Chris Hoffman. “The FBI will continue to work closely with our partners to protect the innovations that have made America a global leader.”

Zhou and his wife, Li Chen, 47, 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 conspired to steal trade secrets related to exosome research from Nationwide Children’s Hospital.

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.

According to his plea agreement, Zhou and Chen plotted 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 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.

The defendants admitted to starting a company in China to sell the isolation kits. They 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 arrested in California in July 2019 and their case was unsealed in August 2019 when they appeared in federal court in Columbus. Chen pleaded guilty in July 2020 to conspiring to steal trade secrets and commit wire fraud.

As part of their pleas, the couple has agreed to forfeit property or gains associated with their crimes. For Chen, this included approximately $1.4 million, 500,000 shares of common stock of Avalon GloboCare Corp. and 400 shares of common stock of GenExosome Technologies, Inc. 

Husband and wife accused of stealing trade secrets from medical research facility

Nationwide Children's Hospital in Dublin, Ohio.

A couple, former employees of an Ohio research hospital, has been charged with stealing trade secrets concerning the research, identification and treatment of a range of pediatric medical conditions.

“Nationwide Children’s Hospital devoted years of work and its own money to researching exosomes in order to promote honorable medical advances,” U.S. Attorney Benjamin C. Glassman said. “The hospital’s Research Institute took reasonable measures to keep its trade secrets secret. I commend the cooperation of Nationwide Children’s throughout this investigation.”

According to the indictment, Yu Zhou, 49, and Li Chen, 46, currently of San Diego, California, conspired to, attempted to and did steal scientific trade secrets related to exosomes and exosome isolation from Nationwide Children’s Hospital’s Research Institute in Dublin, Ohio.

The defendants were arrested in July and the case was unsealed Wednessday (sept. 18) at the defendants’ arraignments in federal court in Columbus, Ohio before U.S. District Judge Sarah D. Morrison.

Zhou and Chen, who 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). 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.

The husband and wife allegedly founded a company in China in 2015 without the hospital’s knowledge. While Zhou and Chen continued to be employed by Nationwide Children’s, they marketed products and services related to exosome isolation through their Chinese company.

The indictment also alleges that in 2017, Zhou and Chen helped co-found an American biotechnology company. As of 2019, the company’s website advertises multiple products and services related to exosome isolation, including a kit that was developed from a trade secret created at a Nationwide Children’s research lab.

Zhou and Chen allegedly used the hospital’s Research Institute resources and equipment to conduct the exosome research necessary for their unauthorized, outside work.

In November 2017, Zhou and Chen allegedly received more than $876,000 and stock related to an asset purchase agreement involving the American biotechnology company. It is also alleged Zhou entered into a stock purchase agreement with that same company under which he would receive $450,000.

Zhou resigned from the Research Institute at Nationwide Children’s, effective Nov. 10, 2017. On Jan. 31, 2018, Chen resigned from her position at the research institute.

Before his official last day of employment with the research institute, Zhou allegedly participated in a press release announcing the American company’s plans to market and distribute “proprietary exosome isolation systems” from its headquarters in Central Ohio.

Conspiring to, attempting to and committing theft of trade secrets is punishable by up to 10 years in prison. Conspiring to, attempting to and committing wire fraud carries a potential maximum sentence of up to 20 years in prison.

The couple's arrest is just the latest in the US clampdown on an alleged Chinese government conspiracy of spying, theft of intellectual property and trade secrets supposedly employing Chinese and Chinese American scientists, researchers and students.

The administration clampdown has resulted in a few convictions but it has also ruined careers of innocent people. Members of the Chinese American community also believe it is fomenting anti-Chinese suspicions among research and educational institutions that is sweeping up Chinese Americans in its wake.

EDITOR'S NOTE. The report was UPDATED Sept. 20 to include context.

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