FBI Reportedly Investigating Hone Capital’s Connections to China

The FBI is reportedly investigating a Silicon Valley venture capital group’s ties to China.

Hone Capital launched with the help of a Chinese private equity group in 2015. Now, investigators are looking into whether the firm passed trade secrets to the Chinese government, the Financial Times (FT) reported Wednesday (Sept. 25).

Sources told the FT that the investigation is looking into whether Hone accessed information about the technology, finances or clients of startups on behalf of its owner or Beijing.

Those sources said there are concerns that some of Hone’s portfolio companies are contracted to deliver services to the American government, and that some of Hone’s funds may have come from the Chinese government.

Hone, the American arm of China’s CSC Group, has invested in startups such as the payments company Stripe. However, sources told the FT that Hone had no access to sensitive information from many of the startups in its portfolio, Stripe included.

The company’s lawyers provided this statement to the FT:

“Allegations that CSC Group, its chairman, or any of its affiliates, including Hone Capital, have misappropriated trade secrets are completely baseless and grounded in nothing but insinuation and speculation fuelled by anti-Chinese sentiment and self-serving allegations from former executives who are actively in litigation with CSC Group over, among other things, their own self-dealing.”

PYMNTS has contacted the FBI for comment but has not yet received a reply.

The news comes during a year that has seen many tech firms tighten security measures over concerns about Chinese espionage, with companies such as Google conducting tighter employee screenings.

And June brought reports that OpenAI was taking steps to restrict China’s access to artificial intelligence (AI) software.

That came months after Congress passed legislation that would ban TikTok unless its China-based owner ByteDance divests itself of the popular social media platform within a year.

“Congress is not acting to punish ByteDance, TikTok, or any other individual company,” Sen. Maria Cantwell, D-Wash., chair of the Senate Commerce Committee, said in remarks on the Senate floor before voting on the bill. “Congress is acting to prevent foreign adversaries from conducting espionage, surveillance, maligned operations, harming vulnerable Americans, our servicemen and women, and our U.S. government personnel.”

For its part, China has banned iPhone use by government employees and workers at state-owned companies, and ordered Apple to remove WhatsApp, Threads, Telegram and Signal from its App Store in China, citing national security concerns.

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