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Business deals

Bowing to US pressure, Chinese owner sells gay dating app Grindr

Trump orders separate Shenzhen-listed company to also divest American holdings

The U.S. Treasury Department building at dusk in Washington: CFIUS, which is housed in the department, is strengthening scrutiny of foreign companies that have access to American personal data.   © AP

NEW YORK -- Beijing Kunlun Tech has agreed to sell gay dating app Grindr to comply with orders from the U.S. government, which deems Chinese ownership of the Los Angeles-based company a national security risk.

Kunlun's board has approved the sale of Grindr for $608 million to an American investment holding firm, the company said in a Friday regulatory filing. The Shenzhen-listed company had poured $245 million into acquiring the Los Angeles-based company, for which it had plans for an initial public offering.

Hours after Kunlun's announcement, U.S. President Donald Trump signed an executive order mandating another Shenzhen-listed company, Beijing Shiji Information Technology, to divest all interests in StayNTouch, a Maryland-based software company providing management systems to hotels.

"There is credible evidence that leads me to believe that" Shiji, through its purchase of StayNTouch, "might take action that threatens to impair the national security of the United States," Trump said in a Friday news release.

Chinese law requires companies to provide access, cooperation, or support for Beijing's intelligence-gathering activities -- a rule that has led the U.S. to distrust companies ranging from telecom equipment maker Huawei Technologies to viral video app TikTok.

Last year, the Committee on Foreign Investment in the United States (CFIUS) ordered Kunlun to divest Grindr after determining its ownership of the dating platform, which contains sensitive personal data such as sexual orientation and users' HIV status, constitutes a national security risk.

The cross-agency government body is also investigating ByteDance's 2017 acquisition of short video platform, which was later integrated into its TikTok brand. 

Kevin Wolf, partner at Washington-based law firm Akin Gump and former assistant secretary of commerce in the Obama administration, expects more cases this year blocking Chinese deals involving tech companies that have a large reservoir of sensitive personal data, as new CFIUS rules broadening the scope of national security risks took effect earlier this year.

Concerns over such transactions are "not really unique to the Trump administration," Wolf said.

"CFIUS in my day had similar concerns regarding acquisitions of companies with large amounts of sensitive personal data," he said. "The only difference now is that standard is much more articulated as a statue as opposed to just a policy that CFIUS had in terms of analyzing national security implications."

Access to U.S. citizens' personal data by a foreign adversary -- a category China falls under -- is seen by CFIUS as facilitating espionage, Wolf said.

Fears over Beijing's possession of American citizens' data have also intensified recently after the U.S. found Chinese military personnel responsible for the hacking of credit agency Equifax, which in 2017 compromised personal data of almost 150 million Americans.

In the case of StayNTouch, the platform could provide Beijing access to a large swathe of travel information, which could be used to track U.S. government employees or compromise them.

Wolf said a similar case could also be reasonably made in TikTok's case. The short video app was downloaded 738 million times in 2019 alone and is hugely popular among teenagers. 

Apart from CFIUS scrutiny that could potentially force ByteDance to divest it, TikTok is also drawing heat from some on Capitol Hill.

Republican Sen. Josh Hawley on Wednesday said he will soon introduce legislation banning the app on all federal government devices.

Chinese ownership of TikTok is "a major security risk for the American people," Hawley said Wednesday. "This legislation is a necessary step to protect the security of the United States and the data security of every American."

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