US FBI Investigates Chinese-American Venture Capital for Industrial Secrets Leak

Investigation into Hon Capital Funded by Chinese Money
Suspicions of US Startup Technology and Customer Data Flowing to China

The U.S. Federal Bureau of Investigation (FBI) is investigating whether a Chinese venture capital (VC) firm, established with Chinese funding, has stolen industrial secrets.

FBI logo embroidered on the agent's shirt in Manhattan borough, New York, USA
Photo by Reuters Yonhap News

On the 25th (local time), the Financial Times (FT) reported that the FBI is investigating whether the Chinese VC 'Hon Capital' leaked industrial secrets for the benefit of the Chinese government or corporations.

Hon Capital was launched in 2015 with $115 million (approximately 152.5 billion KRW) in funding from the Chinese private equity firm CSC. Over the next three years, it invested $215 million (approximately 285.2 billion KRW) in 360 startups in the U.S., establishing itself as one of Silicon Valley's most profitable early-stage investors.

The companies Hon Capital invested in during this period were diverse, including autonomous vehicle manufacturer Cruise, payment company Stripe, and supersonic passenger jet manufacturer Boom. Notably, Hon Capital invested about $10 million (approximately 1.33 billion KRW) in Boom, which later grew into a multi-billion-dollar company, secured partnerships with the U.S. Air Force, and entered into numerous government contracts, including research projects with NASA.

The FBI is investigating whether technology or customer information from U.S. startups flowed to China through Hon Capital. To this end, it is also known to be investigating current and former employees of Hon Capital as well as the companies that received investments.

FT pointed out that this investigation is taking place amid escalating trade tensions between the U.S. and China. According to FT, Shan Xiangshuang, the founder of CSC, Hon Capital's parent company, is known to have been a member of the Chinese Communist Party and a government official.

However, people familiar with the investment situation at the time stated that Hon Capital did not have access to sensitive information of the invested companies. CSC's legal representative also rebutted, saying, "There is no basis whatsoever for claims that CSC or Hon Capital misappropriated trade secrets; these are mere speculations fueled by anti-China sentiment and claims from former executives involved in lawsuits with CSC." He added, "CSC believes that all investments in the U.S. were made in compliance with relevant laws."