Shares of Webull, the crypto trading platform that has faced scrutiny over its alleged China ties, have tanked nearly 76% since it went public through a special acquisition corporation early last year – but that should hardly be a surprise if you read On The Money.Shares of Webull, the crypto trading platform that has faced scrutiny over its alleged China ties, have tanked nearly 76% since it went public through a special acquisition corporation early last year – but that should hardly be a surprise if you read On The Money.
Since at least 2023, this column has been reporting growing concern in Congress over whether management of the discount broker with 28 million users worldwide is too cozy with the Chinese surveillance state. The worry is that the firm collects sensitive customer data on Americans that could be shared with Chinese spies–something the company has steadfastly denied.
On Wednesday, the bipartisan House Select Committee on China put a finer point on those concerns in a 23-page report titled “Free Trades, Hidden Ties Exposing Webull’s China Links.”
According to the report, “Webull’s ownership architecture, technical workforce, technology infrastructure, cross-border data routing, corporate financing, and compliance frameworks are tied in structural ways to the People’s Republic of China,” also referred to as the PRC in the paper.
Webull in the past has described itself as “both a US and Chinese company,” and has argued that its American customer data is stored in the US and is 100% secure from foreigners. But the report notes that a Chinese national, Anquan Wang, is Webull’s founder, chairman and CEO.
The report also notes that Wang controls the company through a dual-class share structure with 79.2% of the company’s voting power, meaning Wang can “control the election of directors and other major corporate decisions requiring shareholder approval.”
The Committee said its findings underscore “national security concerns” that have escalated in recent years, where among other issues, “Webull’s data practices expose American investors to PRC legal and surveillance risk.”
As i mentioned, the allegation that Webull is a tool for espionage is something the company has always denied. It repeated its denial after the explosive report took shares down 20% when it first hit the tape Wednesday morning. Webull finished the day down 19%, trading at $5.89 at the market’s close.
In a statement to On The Money, a Webull press rep says “It is deeply disappointing that the Select Committee published a report containing significant inaccuracies and unsupported conclusions without ever seeking clarification from Webull.”
The Webull press rep didn’t immediately respond to a request for comment on what those inaccuracies were.
The statement added, “Webull has made every effort to cooperate with the Committee, but did not hear from them for more than 20 months before this report was released. Webull’s US business is conducted from its global headquarters in St. Petersburg, Fla., and its office in New York City, while US customer data is stored in the US and access to sensitive customer data is controlled by the US. We remain prepared to address any questions directly and with the same transparency we bring to the SEC, FINRA, and regulators worldwide.”
A spokesman for the committee, formally known as the House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party chaired by John Moolenaar (R-MI), tells On The Money that in regards to the company’s data storage the “report does not dispute where the data is stored. Its finding is about who can reach the data and the systems that process it.”
The US securities markets are regulated by the SEC or the Securities and Exchange Commission, a federal agency also known as Wall Street’s top cop given its importance in monitoring Wall Street. FINRA, the Financial Industry Regulatory Authority, is the securities industry’s self-regulator, which under law provides front-line oversight of Wall Street and its various players. Indeed, Webull appears in compliance with both outfits. A press rep for FINRA declined to comment; an SEC spokesman had no immediate comment.
The report, meanwhile, touts six so-called findings: “Webull’s data practices expose American investors to PRC legal and surveillance risk; Webull misrepresented where key employees worked and how they were supervised; Webull’s governance is dominated by PRC-linked control: Webull’s regulatory controls were weaker than its assurances suggested; Webull’s subsidiary accepted PRC government funding conditional on CCP loyalty while its affiliates expanded in China; Webull’s clearing and custody safeguards are concerning.”
It is calling for various reforms including the extension of “foreign adversary data protections to brokerage records.”
The report’s concerns echo some of the issues US regulators have grappled with when charting the future of the popular formerly China-owned short-video app TikTok. That includes worries that the PRC government, namely the Chinese Communist Party, is siphoning user data for espionage purposes since the surveillance state there basically controls every company on its soil.
Both Republicans and Democrats have debated for years whether to ban TikTok, worried about the potential for identity theft, the CCP gleaning “biometric identifiers” and search history of its 170 million US users.
President Trump, who once sought to ban the app, recently cut a deal with China in which its US subsidiary is now majority owned by US investors and data is held in the so-called cloud operated by US tech giant Oracle.