Two men who are being accused of attempting to sell Tesla battery manufacturing and trade secrets were arrested in an undercover sting earlier this week.

Klaus Pflugbeil and Yilong Shao, both of Ningbo, China, were under suspicion of trying to sell the information, which included battery manufacturing techniques and other proprietary information that Tesla had gathered.

Pflugbeil met with “businessmen” who were actually undercover federal agents on Tuesday morning and was arrested. Shao still remains at large, according to the Associated Press.

Interestingly, Pflugbeil and Shao both worked for Hibar Systems, a Canadian battery manufacturing company that Tesla bought in 2019.

Tesla acquires Hibar Systems in push toward in-house battery cell development

The two men then moved to China and set up a company that aimed to sell the “blatantly” stolen trade secrets that Tesla had discovered over its years of attempting to build electric vehicles.

Breon Peace, U.S. Attorney for the Eastern District of New York, said the move “cost many millions of dollars in research and development, and sold products developed with the stolen trade secrets.”

Pflugbeil and Shao’s company had also gone international and set up locations in Canada, Germany, and Brazil. The company had labeled itself as an alternative solution to assembly lines but makes the same battery assembly lines that Tesla uses with its exclusive information.

Interestingly, Tesla is only mentioned as “Victim Company-1” in the U.S. Department of Justice’s press release announcing the arrest of Pflugbeil.

The initial contact between undercover agents and Pflugbeil and Shao happened around September 11, 2023, as they attending a trade show in Las Vegas:

” The undercover agents were introduced to Shao at the trade show and later to Pflugbeil via email. Subsequently, on or about Nov. 17, 2023, Pflugbeil sent, via email, a detailed 66-page technical documentation proposal to an undercover agent (UC-1) while UC-1 was in the Eastern District of New York. The proposal notes, ‘this technical documentation package contains [Business-1] proprietary information which must be kept confidential.’ In reality, the proposal contained Battery Assembly Trade Secret information belonging to Victim Company-1:  at least half a dozen drawings Pflugbeil used in the proposal and sent to UC-1 were, in fact, Victim Company-1’s information related to the Battery Assembly Trade Secret.”

Pflugbeil and Shao attempted to pass along the Tesla trade secrets by keeping the information “confidential” and obviously trusted the federal agents.

Pflugbeil is facing up to 10 years in prison.

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