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U.S. exploring whether it has authority to review Musk’s Twitter deal

Terms of the deal give large foreign investors access to confidential information about the social media platform

The U.S. government is exploring whether it has legal authority to review the terms of Elon Musk's deal to purchase Twitter. (Chris Ratcliffe/Bloomberg News)

U.S. officials are weighing whether to open a formal investigation into Elon Musk’s purchase of Twitter as new details emerge about the privileges granted to large foreign investors under the terms of the deal, people familiar with the matter told The Washington Post.

A person familiar with the developments said Wednesday that the Treasury Department had contacted Twitter to learn more about the structure of its new ownership and the confidential agreements Musk struck with his foreign investors. Those include a Saudi prince’s holding company, a subsidiary of the Qatari sovereign wealth fund and Binance, a cryptocurrency exchange that was founded in China but has since moved its operations elsewhere.

Experts on the foreign review process said of particular interest will probably be whether any of Musk’s foreign investors would have special privileges to access personal data about Twitter’s users. According to people familiar with Musk’s purchase of Twitter, those who invested $250 million or more have access to information beyond what a lower-level investor would receive. The Saudi and Qatari funds and Binance have invested above that level. But what that additional access includes is not known.

As a U.S. citizen, Musk’s purchase of Twitter is not subject to review. But the Committee on Foreign Investment in the United States could investigate the role of the foreign investors in the company and order changes in their involvement, experts on foreign investment review say.

“Twitter is sensitive infrastructure for the national discussion, and it has foreign co-investors who clearly do not abide by democratic norms and values,” said Emily Kilcrease, who served as CFIUS coordinator at the Commerce Department. “The fact that they are looking at that aspect of the overall Twitter deal makes a lot of sense to me.”

Musk also has extensive ties to China through Tesla, the publicly traded electric vehicle company he runs, but that indirect leverage would not typically be a core focus of a national security investment review, experts said.

Kilcrease said the early review would be complicated, potentially lasting months, because the investors are in a murky middle ground as significant participants with some special rights. To justify a full CFIUS review, the foreign co-investors would need to have more than inside information about Twitter’s strategy and financial health, she said.

Bill Reinsch, a senior adviser at the Center for Strategic and International Studies, a D.C.-based think tank, predicted that eventually CFIUS would decide a full investigation was merited. “There’s a growing number of people inside and outside the administration who are concerned about what might happen with Twitter,” he said.

But he said that if CFIUS does undertake an investigation, officials would probably be more concerned about any Chinese privileges under the deal than those given to the Saudis.

“We’re not very happy with the Saudis right now, but I don’t think they’re regarded as a strategic threat,” he said. By contrast, “the Chinese are … and they have demonstrated a capacity to use data to surveil their own citizens, so there’s a track record there.”

Foreign access to Americans’ sensitive personal data has been a top concern of U.S. national security officials, said Larry Ward, partner in the national security law group at the law firm Dorsey and Whitney. Ward said Saudi Arabia’s role could also concern U.S. officials.

“Sensitive personal data by itself would certainly be enough of a national security risk for the committee to be curious about it,” Ward said. “There are a number of countries where foreign government ownership has been a real concern … and certainly Saudi Arabia is in that group.”

President Biden on Nov. 9 said that Elon Musk’s joint acquisition of Twitter was “worth being looked at,” considering the involvement of foreign governments. (Video: The Washington Post)

How Twitter is governed also could impact a decision. Musk dismissed Twitter’s board of directors and has not said whether he will replace them. “If the Saudis are given some additional rights that go beyond what would be normally be expected, such as a board seat as an observer or access to nonpublic information,” that would give CFIUS jurisdiction, said Sarah Bauerle Danzman, an associate professor at Indiana University and a former CFIUS staffer through her work with the State Department.

In September, President Biden issued an executive order emphasizing that the CFIUS process in general should look carefully at sensitive personal data.

Though not giving the body any new powers, the order said CFIUS should review foreign investments where the new owner has “access to United States persons’ sensitive data, including United States persons’ health, digital identity, or other biological data and any data that could be identifiable or de-anonymized, that could be exploited to distinguish or trace an individual’s identity in a manner that threatens national security.”

Experts said Twitter would easily qualify under that concern, leaving officials to weigh matters of foreign access, ownership stake and control.

A 2018 legislative update to the CFIUS rules gave CFIUS the authority to examine minority stakes by foreign investors in critical areas, including businesses that hold sensitive personal data.

Andrew Grotto, a former senior director for cybersecurity policy in the Obama and Trump administrations who has focused on CFIUS, said access to information could prove a vital security concern.

“That is an area where I think CFIUS has some pretty robust authority to ensure that Americans’ personal data isn’t exploited nefariously by a foreign government,” he said. “That springs to my mind at least as one major vector for CFIUS to pursue an investigation.”

White House officials previously have discussed the possibility of a national security review of the acquisition, a person familiar with the conversations said. Additionally, officials at the FBI looked into the potential counterintelligence risks posed by the deal this past spring, according to two people familiar with the inquiry — though it is not clear whether the matter was studied by senior officials at the bureau or if those discussions are still active. All the people spoke on the condition of anonymity to discuss matters they were not authorized to disclose publicly.

Musk and his attorney, Alex Spiro, did not respond immediately to a request for comment.

The U.S. government’s preliminary attempts to scrutinize the Twitter deal come as the billionaire introduces new changes to the structure of one of the world’s most powerful communication platforms.

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The matter could be fraught for the Biden administration. Biden aides have tried to counter Chinese influence but do not want to be accused of weaponizing a national security process to attack Musk, who says he voted for Biden in 2020 but has lately become a political critic.

As Elon Musk expands his reach, Washington worries

Musk’s China ties are extensive. Tesla’s “Gigafactory” in Shanghai has been its busiest production plant and serves as a vital export hub. Tesla is also reliant on China for production needs — the country controls the global supply of lithium, the key component in electric vehicle batteries — through its vast processing and refining apparatus.

Binance invested $500 million in Musk’s Twitter purchase. While it moved out of its initial home in China, the company has partnered with a Chinese-government-owned firm on a blockchain initiative. A Binance spokesman previously told The Post that effort was defunct, that it had no presence in China and that it had never taken any investment from a Chinese government-controlled entity.

Saudi Arabia is among the biggest private investors in the new Twitter. U.S. relations with the kingdom have fractured under Biden, with the Saudi-led group of oil-producing nations known as OPEC recently announcing a cut to output in a direct rebuke to the White House.

The U.S. government previously has said Saudi officials sought information about Twitter users, and a former Twitter manager was convicted in August of concealing payments from Saudi agents in exchange for accessing confidential user data.

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A growing number of Biden allies have in recent days clamored for CFIUS to investigate how these nations could influence Musk.

On Monday, Sen. Chris Murphy (D-Conn.) said on Twitter that the federal government should investigate national security concerns connected to Saudi Arabian entities’ investments in the social media platform. Last week, the American Economic Liberties Project, a left-leaning group, also said in a statement that both CFIUS and the Federal Communications Commission should investigate Musk’s takeover of Twitter given his “potential dependencies on the Chinese government.”

“We should be concerned that the Saudis, who have a clear interest in repressing political speech and impacting US politics, are now the second-largest owner of a major social media platform,” Murphy said on Twitter.

“When a senator sends a letter to CFIUS requesting a review, the committee is going to poke around a little,” said Bauerle Danzman, the Indiana University professor.

CFIUS remedies would not necessarily scuttle Musk’s acquisition of Twitter, Grotto said, but the government could impose restrictions on what sorts of information rights are given to foreign parties or seek to limit powers they may have over the new company.

“CFIUS would have authority to demand mitigations including possibly forcing the parties to rewrite that,” he said.

Tyler Pager and Jeanne Whalen contributed to this report.

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