Access to American innovation and intellectual property is high on the list of priorities for the Chinese Communist Party (CCP). It allows strategic influential access to our talent, technology, and politicians. Chinese investments in venture capital and private equity are notoriously difficult to trace. Still, they should be of great interest to Americans and U.S. policymakers because of the implications for our national security. Speaker McCarthy and other prominent politicians benefit from venture capital and private equity investments in China.
The highly successful Sequoia Capital is one of the venture capital firms Americans should monitor, mainly because of its shift toward AI and military technology investments. Much of China's economic and political strategy is superbly documented in a Sept. 2022 paper by Emily de La Bruyere and Nathan Picarsic. They write about the weaponization of capital in China. It is an essential primer on the "strategic implications of China's private equity/venture capital playbook."
China's backing of private equity and venture capital poses significant risks in part because lawmakers in the U.S. repeatedly underestimate or conveniently choose to ignore the risks involved, possibly for personal gain. As a result, investigations of Chinese influence often result in well-worded reports—not laws or mechanisms that would protect Americans from the very real national security threats posed by the CCP and their proxies. In addition, influential lawmakers, like Speaker Kevin McCarthy, receive substantial funding for their campaigns from firms like Sequoia, which have strong connections to the CCP.
While not always easy to trace, funding that is tied to the Chinese Communist Party is nevertheless problematic. It often impedes lawmakers at all levels of government from making objective decisions that benefit the American people without their knowledge. It would be vanishingly rare for a politician to overtly state that their decisions are influenced by the sources of their funding. It is, therefore, paramount that Americans take such ties more seriously.
McCarthy Gets Big Money from Sequoia
Doug Leone was a managing partner of Sequoia until he stepped down in 2022. FEC.gov data shows Leone donated over $1.7 million to McCarthy through his various PACs and campaigns between 2018 and 2023. Notably, Leone also donated generously to Sen. Marco Rubio, the RNC, Sen.Tom Cotton, the Senate Georgia Battleground Fund, the Perdue for Senate campaign, Donald J. Trump, Sen. Lindsey Graham, Sen. Steve Daines, Sen. Lisa Murkowski, Sen. Susan Collins, the McSally campaign, and others.
Sequoia Capital is one of the world's largest venture capital (VC) firms. It was recently involved in the catastrophic FTX loss, where it apparently failed to do its due diligence on behalf of investors.
Chinese entrepreneur Neil Shen runs its China arm, Sequoia Capital China. Shen has direct ties to the Chinese Communist Party, serving as a representative at several Chinese People's Political Consultative Conference (CPPCC) meetings. The conference is organized by the "patriotic United Front" of the Chinese people. According to China.org.cn, "The Communist Party of China, various democratic parties, democrats with no party affiliations, people's organizations and public figures from all walks of life jointly founded the CPPCC shortly before the birth of New China."
Sequoia has invested in many well-known companies, including those that focus on AI and military technologies. The implications are profound; the fruit of some of these investments will and have landed in the hands of the Chinese military. Key officials in U.S. defense understand the threats posed by China—sequoia funds companies involved in developing critical and sensitive national defense technologies.
Technology investor Brian Costello was one of the advisors to the House Intel Committee about Sequoia's business dealings. In particular, Costello is concerned about the significant shift toward Sequoia's AI and weapons technology investments in China, most of which result from Neil Shen's (Sequoia Capital China) efforts and connections.
Costello explains in interviews with Steve Bannon on Wednesday and Thursday that those committees were offshoots of Devin Nunes's important intelligence committee work to expose the truth about Russiagate. Nunes served as Chair of the House Intelligence Committee from 2015 to 2019.
Costello says Nunes had "deputized trusted advisors Retired Col. Derek Harvey and Col. George Pappas to look into how the CCP was using Wall Street" to further its interests in China. Harvey served as the chief investigator on HPSCI and also served on President Trump's National Security Counsel. Pappas and Harvey had worked alongside Kash Patel during the Russia investigation but reported directly to Nunes. Both the Intel Committee and the SEC were looking at Sequoia Capital, and according to Costello, Sequoia was unresponsive to questionnaires on their investments in China.
Speaker McCarthy later appointed Rep.Turner (R-OH) as Chair of the House Intelligence Committee; he allegedly wanted to "turn the page" on the Committee's partisan politics. Costello says Turner "shut down the investigation into Sequoia." This happened "around the time Sequoia became one of McCarthy's biggest donors," explains Costello.
To be clear, there were essentially three parallel investigations when Nunes was in office; SEC, Intelligence Community investigations, and a China initiative investigation at the DOJ/FBI.
Costello believes the China investigations die because they do not benefit the political elite. Costello cites the example of Gary Gensler. Gensler is now the Chairman of the Securities Exchange Commission. "He should have been investigating the number of claims I brought to the SEC.," adds Costello. "And the SEC should have been investigating Gary Gensler, who was Hillary Clinton's campaign CFO, the one signing the checks for the Russia hoax."
Costello shares he "sent the McCarthy advisor an email after they fired colonel Harvey and the donations to McCarthy started to flow." He warned them to "be very careful with the money they were taking from Sequoia." He never received a response.
Sequoia's Influence in D.C. and China
Sequoia and similar entities are often guilty of violating our laws but get away with it for a variety of reasons, according to Costello. More importantly, our policymakers "use firms like Sequoia to influence policy in the U.S." They are, Costello says, "essentially buying [Chinese] malfeasance in the government," with very little transparency and zero consequences.
Costello brought seven Title 18 claims, "capital market securities fraud, racketeering, FARA violations, and corporate espionage," among them, to two former supervisory FBI special agents, who gave them to a field office. Instead of investigating, the field office "immediately transferred the claims to the seventh floor of the DOJ," where the investigation came to a screeching halt thanks to United States Deputy Attorney General Lisa Monaco. He also asks why Congress and the Securities Exchange Commission often allow investigations like this to slip into a black hole. It doesn't take much to figure out why it did, given what we now know about the now highly politicized DOJ and the FBI.
Former Nunes advisor, Colonel Derek Harvey (Retired), adds that it isn't only members of Congress who may be compromised but President Joe Biden himself with his connections to China. Harvey explains:
"The FBI, The Department of Justice, and the Securities Exchange Commission, who should be protecting American national and economic security interests and pursuing criminal activities; whether they're by Americans, American elected officials, or Chinese business entities and Chinese business leaders who are breaking the law in America. They're not doing their job. They're covering this stuff up.
Why? Because Sequoia Capital, Sequoia Capital-China, Neil Shen, and the Chinese Communist Party, as the DNI and intelligence community have reported, use these business types of relationships to give preferential treatment. They become rainmakers, and they set a trap for American businesses. Whether it's a Boeing or a venture capital firm, provide the bait, and the bait is you're going to make a lot of money."
The CCP ensures that businesses in China will make a lot of money for the U.S. and China alike. Enter the guarantor, Sequoia-China's Neil Shen Nanpeng, whose net worth now is $3.3 billion and who was educated in China and the U.S. (Columbia and Yale). According to reporting from Business Chronicler, "Through his leadership at Sequoia, the company has successfully invested in more than 300 consumer and tech enterprises like Dianping.com, Vip.com, JD.com, Meituan.com, and 360.com."
Shen also co-founded the travel site Ctrip.com and has his hands in multiple internet companies in China. Shen worked as an investment banker at Deutsche Bank Hong Kong, Chemical Bank, Lehman Brothers, and Citibank. Between his business dealings and his connections to the CCP, Shen can easily ensure U.S./China investments are lucrative and successful.
Sequoia was involved in lobbying against the Trump administration's ban on TikTok in America. The company has a substantial interest in ByteDance, TikTok's parent company. Keep in mind that TikTok benefits Democrats and their fancy donors politically as well. TikTok's political influence on younger people in the 2020 and 2022 elections was unprecedented.
Harvey also explains that Shen has "raised over $9 billion from the likes of Stanford University, Notre Dame endowments, other business enterprises, banks, et cetera. And that money was as invested into China's Microchip business development."
Crankstart: Foundation Used As Tax-Free Cash Cow
In addition, it is people like Michael Moritz, a former principal at Sequoia, who set up tax-free foundations like CrankStart, which conveniently make it harder to follow the money. Crankstart is a $4.2 billion nonprofit.
ProPublica shows Moritz's investments in China. Costello says, "It's called China Fund. The investments are from his relationship with Sequoia, and then that money flows back into Crankstart with no taxes because it's a foundation, and then it's used to fund world programs across San Francisco universities, for example."
Costello explains the money trail, "So Moritz transferred his Sequoia China fund ownership over to Crankstart. Crankstart gets the returns from Shen's investments in China, which is aligned with the Chinese Communist Party. The money then flows back into Crankstart and funds the Democratic Party."
Then, the Crankstart money funds efforts to accuse the Securities Exchange Commission or the FBI of going after China. Harvey adds:
"They call them racist, and then they get cease and desist agreements. It's an inside-out game because the administration and the Democratic left want to protect things like TikTok and their money-making schemes that then bring money back in for their campaigns for their left-wing causes. And they are able to protect their donor class because they don't want any criminal prosecutions."
According to Harvey, "Crankstart then coordinates the fundraising for a $300 million fund. ACLU gets $20 million from Crank Start. ACLU then files the law cases and accuses the Department of Defense of pressuring China, Wall Street, or the Intel Community for tech issues."
Moritz is part of the San Francisco elite and a huge Democrat donor. He has donated millions to AB Pac, a liberal Super PAC, the Lincoln Project, and ActBlue. Moritz is one of the largest donors to the ACLU, which, according to Costello, lobbies on behalf of China to stop "racist" policies, a label no good UniParty member ever wants to be awarded. Notably, James O'Keefe mentioned in Wednesday's expose that more will come on China's alleged funding of ActBlue here in the U.S.
Remember also that ACLU lobbied hard to stop the TikTok bills. What was ACLU's statement at the time? A ban on TikTok "could cut off the flow of information, art, and communication that social media provides, interfering with communities and connections users in the United States have with each other and people worldwide. This interference with freedom of expression and association violates the First Amendment."
I would argue both sides of the aisle benefit from shenanigans like these. I'd ask why McCarthy and Rubio get so much financial attention from Sequoia and how it influences their policy decisions.
Such schemes also often involve Americans' hard-earned money. Costello says pension money was almost certainly a part of the $9 billion that "was transferred into the China fund that in turn create $2 trillion worth of technology and innovation value for China." Costello says he received confirmation from Elizabeth Warren's office that the Senator "knew the DOJ possessed a number of criminal allegations against Neil Shen connected to her state's pension fund. So it's a significant problem. It's our own people's hard-working money that they're investing back, impacting our economic security—and that IS our national security."
July 2022 Intelligence Report Speaks to the Peoples Republic of China Influence in U.S.
The Select Committee on China was created in early 2023. The Chair is Rep. Mike Gallagher (R-WI), a former military intelligence officer who also serves on the House Intelligence Committee. Costello says the Committee was almost certainly created because of Nunes' efforts to expose China's influence in the U.S.
Some of Nunes' work may also be responsible for the information published in an 8-page July 2022 DNI report on China. While the report is careful to "not cast blanket suspicion on all outreach from China," it does speak to the "threat of exploitation emanates from the PRC (People's Republic of China) government and the Chinese Communist Party (CCP)."
The report mentions PRC influence-operations at the federal, state, and local levels that use relationships to "push for policies friendlier to Beijing." It also mentions the various influence operations perpetuated by the CCP's United Front Work Department (UFWD). These operations use our consulates, the Department of State, sister cities programs, university partnerships, and "the creation of dependencies" through PRC proxies to "cultivate and leverage business and government leaders and the U.S., state and local level."
Almost all have "strings attached" and do not necessarily benefit the American people. More importantly, in some cases, the PRC levies political or financial "punishments" that take the form of "withdrawn investments or other actions."
Influence Operations/PRC/DNI report
PRCInfluenceOperations: DNI 2022
The Chinese are actively fortifying their military and defense technologies. U.S. venture capital and private equity firms are often directly or indirectly responsible for the maturation of AI technology in China and high-end defense weapons. And even when they aren't, the Chinese find ways to copy our technology, or they send scientists to train here who later return to China to contribute to defense technology programs for the People's Republic of China.
As an example of what can happen to our intellectual property, a Sept. 2022 report from Strider Technologies showed that Los Alamos National Laboratory alumni are now "driving key advances in military and dual-use technologies for the PRC including in hypersonics, deep-earth penetrating warheads, unmanned aerial vehicles, and submarine noise reduction." The report showed:
"Between 1987 and 2021, the report finds that at least 162 scientists who had worked at Los Alamos returned to the PRC to support a variety of domestic research and development programs. Of the 162 returnees, at least 59 scientists were selectees of the PRC's flagship talent recruitment program—the Thousand Talents Plan (TTP) and its youth branch, the Youth Thousand Talents Plan (YTTP)."
"Most concerning, 15 returnees worked as permanent staff members at Los Alamos. Thirteen of the 15 former permanent staff members were recruited into PRC government talent programs. While at Los Alamos, these scientists sponsored visiting scholars and postdoctoral researchers from the PRC and received U.S. government funding for sensitive research. At least one former staff member held a Department of Energy (DoE) "Q Clearance" allowing access to Top Secret Restricted Data and National Security Information."
AI technology powers robots and drones, giving autonomy to military weapons systems. AI technology makes the expansive and frighteningly accurate Chinese surveillance state possible. AI technology is already being pursued in China as the "brain" of the command structure. After Google DeepMind's AlphaGo program's 2016 victory over Go grandmaster Lee Sedol, China's Central Military Commission Joint Operations Command Center "argued that AlphaGo's victory 'demonstrated the enormous potential of artificial intelligence in combat command, program deduction, and decisionmaking.'" In fact, China's leadership "believes that being at the forefront in AI technology is critical to the future of global military and economic power competition."
The one thing that becomes clear to anyone who understands China's patient geopolitical strategy is that China does not need to invest in a global kinetic war to accomplish its goals. It has already invaded America's economic and political soil with its Grey Zone Warfare tactics. Sequoia Capital is but one of the influential players that serve as a vector of Chinese influence in the U.S. In June, the company announced plans to sever its ties with China, but only time will tell just how severed those ties will be. Businessmen and politicians are well-practiced in the art of hiding investments.
Americans would do well to pressure business leaders and politicians to provide better transparency and more robust guardrails against China's "outsize role in private markets and broader weaponization of capital." Currently, it seems they are doing very little to protect us.
*Corrections were made to this column for the sake of accuracy.
