US Treasury launches investigation into Benchmark Capital’s ties to Chinese firm Manus AI

According to reports,  the US Treasury Department is looking into a $75 million investment by Benchmark Capital in the Chinese company Manus AI. This now escalates the tech rivalry between the US and China and the desire of the US to maintain its position at the forefront.

Officials from the department recently asked the Silicon Valley company if the funding is covered by new rules that limit investments in AI and other important technologies going to China.

The law, which is based on the Outbound Investment Security Program, was part of an order made by President Joe Biden in 2023. However, it didn’t become law until earlier this year. 

It dictates that anyone or any organization in the US has to tell the Treasury Department about any investments they make in key areas like AI that could “accelerate and increase the success of the development of sensitive technologies” that are not in the US’s best interests.

In March, Manus released a great demo movie called “Second DeepSeek Moment.” The company showed that its AI agent could do difficult tasks by itself, such as long study projects and making websites and apps independently.

OpenAI’s CEO, on the other hand, is urging US lawmakers not to make rules that will slow down the US AI. 

Silicon Valley investors don’t like the investment in Manus

A number of US law companies told Benchmark that the investment did not violate the rules on outbound investments since Manus was not creating its own AI models. 

Its lawyers also came to the conclusion that the company is not actually based in China. A person familiar with the situation says that the company’s parent Butterfly Effect is based in the Cayman Islands and has workers in the US, Singapore, Japan, and China. The person said that Manus saves all of its data on cloud servers run by Western companies that are not in China.

Still, some Silicon Valley investors don’t like the investment in Manus. For example, Josh Wolfe, co-founder of Lux Capital, wrote on X that the investment “makes zero sense.”

Delian Asparouhov, a partner at Founders Fund, also said, “I am not saying Benchmark partners are Chinese assets[…]But they are def assets to China.”

On the other hand, when Microsoft President Brad Smith was asked if Benchmark’s investment in Manus was in the US national interest. 

Benchmark doesn’t believe that cutting ties with China is a good idea

One of the best-known venture investors in the business, Bill Gurley, is a general partner at Benchmark. He has spoken out against efforts to cut ties with China

According to him, “Our nation’s recent curbs on Nvidia H20s, intended to slow China AI innovation, will enhance & accelerate Chinese AI innovation. This action will create the OPPOSITE of the intent.” 

However, many people are afraid that Chinese technology could give Beijing an easy way to get information. And there are new claims that Chinese students at Stanford, especially those studying AI, are being forced to work as spies for China. This is happening in the middle of Silicon Valley.

According to reports, even startups that have widely used DeepSeek’s open-source AI models are using technology that might have unknown security holes that could help China. To ensure that even more dollars don’t get through the cracks in the rules, the Trump administration is considering putting even more limits on investments going to China.

Benchmark is known for carefully choosing which startups to invest in and is one of Silicon Valley’s most successful venture capital firms. It gave companies like eBay, Twitter, Uber, and Snap their first investments. 

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