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FBI Probes Chinese Company Over Potential CFIUS Violation

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The FBI has launched an investigation into Huafon’s potential violation of a national security agreement with the Committee on Foreign Investment in the United States in connection with the Chinese chemicals company’s acquisition of DuPont’s biomaterials business.

CFIUS approved the $240 million acquisition deal, which was finalized in May 2022, with the condition that Huafon not be given access to DuPont’s proprietary fermentation process used to make BioPDO, a liquid product extracted from corn. According to a Bloomberg report, a U.S. intelligence assessment identified a byproduct of the process as a potential key ingredient to powering up cutting-edge weapons.

 To meet the CFIUS condition, Huafon established CovaPDO, an entity under its U.S. holding company Covation that it is restricted from accessing because it is the one that keeps the information on the BioPDO production process.

Department of Defense officials later learned, however, that employees of Covation Biomaterials, another entity under Covation, found BioPDO information on their servers a month after the acquisition deal was closed, prompting the FBI’s involvement.

According to an article in the Wall Street Journal, Covation blamed DuPont for transferring the information to the wrong corporate entity, while DuPont said it only followed instructions from the holding company.

The issues stemming from the acquisition have led President Joe Biden to order stricter scrutiny of transactions that could provide U.S. adversaries with access to critical information and technologies.

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