Even though Chao was leaving TuSimple’s board and Sina was banned from boosting its stake in TuSimple, the Sina CEO still had an economic interest in the firm. Cfius was also concerned by Chao’s decision to renounce his US citizenship in late 2021.
In addition, they highlighted a provision in the deal granting TuSimple a 6-month grace period before it had to halt collaboration between its US and China operations 
the company’s US team could share key info such as source code with their China counterparts “unabated and with the explicit approval” of Cfius until Aug 2022.
Red flags about TuSimple’s Cfius agreement emerged soon after its signing. Then-CEO Cheng Lu, who’s about to step down in early Mar 2022, wrote to a board member that he wasn’t comfortable with how much Sina exerts influence within TuSimple, alleging that, through proxies, Sina controlled more than the reported 10% stake in TuSimple then.
In China, TuSimple engineers were helping build Hydron, which operated out of the company’s Beijing office. Emails / group chats showed staff at Hydron, state-owned truck manufacturer Beiqi Foton Motor Co and TuSimple’s US and China units discussing topics such as where to place sensors on trucks, power supply and management issues, and the vehicle-machine interface.
A lawyer at Paul Hastings who handled TuSimple’s Cfius matters warned in a memo to the company’s chief legal officer that linking up with 
firms was risky. The Pentagon wouldn’t believe that TuSimple’s IP could be protected from partners “no matter what we tell them”. But the warning fell flat. Xiaodi Hou, whom Chao backed to co-found TuSimple, became CEO in Mar.
Reed Werner, a former Pentagon official placed on TuSimple’s board as part of the Cfius deal, reported the Hydron rumors directly to Cfius. He wanted Cfius to require that TuSimple share the names of potential manufacturing partners with the government before signing any contracts.
Cfius didn’t act in time. A month later Chao traveled to San Diego and announced Hydron’s launch just hours after attending his final TuSimple board meeting.
TuSimple’s board launched an internal investigation. Company / government officials concluded TuSimple had, in effect, shared all the US unit’s valuable technology with entities.
Investigators were also alarmed by evidence that TuSimple had been sending the data its trucks collected on US roads to at least 7 different contractors in China for processing. Cfius permitted this, but the info could help others train their own models as well as provide them with insight into critical infrastructure in the US.
In Oct 2022, CEO Hou revealed, under pressure from investigators looking into Hydron, to the board that he’d received two interest-free loans totaling $3.5M from the aide to Chao who’s also on Hydron’s board.
TuSimple’s board fired Hou. He then agreed to participate in a Chao-endorsed plan to fight back that included ceding his voting power to TuSimple co-founder Mo Chen, who used their combined voting power to engineer a board coup that included the firing of Werner, the Cfius liaison.
In the coming years, TuSimple would cease its US trucking operations, delist from Nasdaq, decamp to Beijing, rebrand as gaming company CreateAI and begin transferring $1B in cash + investments to China — with few repercussions from the US.
In May 2024 TuSimple agreed to pay a $6M fine to Cfius to resolve the panel’s investigations into the firing of Werner and whether there’s any improper tech transfer — w/o admitting fault, saying the info it shared with entities wasn’t forbidden by the Cfius agreement. A related, yearslong SEC probe remains unresolved.
Hou sued Chen in Delaware in a bid to reclaim his voting power in TuSimple. A Delaware Chancery Court judge rejected the case in an Oct 31 ruling and said evidence showed that a “Sina bloc” including Chao and Chen remained involved in TuSimple despite the Cfius agreement meant to limit their influence.
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the company’s US team could share key info such as source code with their China counterparts “unabated and with the explicit approval” of Cfius until Aug 2022.
Red flags about TuSimple’s Cfius agreement emerged soon after its signing. Then-CEO Cheng Lu, who’s about to step down in early Mar 2022, wrote to a board member that he wasn’t comfortable with how much Sina exerts influence within TuSimple, alleging that, through proxies, Sina controlled more than the reported 10% stake in TuSimple then.
In China, TuSimple engineers were helping build Hydron, which operated out of the company’s Beijing office. Emails / group chats showed staff at Hydron, state-owned truck manufacturer Beiqi Foton Motor Co and TuSimple’s US and China units discussing topics such as where to place sensors on trucks, power supply and management issues, and the vehicle-machine interface.
A lawyer at Paul Hastings who handled TuSimple’s Cfius matters warned in a memo to the company’s chief legal officer that linking up with firms was risky. The Pentagon wouldn’t believe that TuSimple’s IP could be protected from partners “no matter what we tell them”. But the warning fell flat. Xiaodi Hou, whom Chao backed to co-found TuSimple, became CEO in Mar.
Reed Werner, a former Pentagon official placed on TuSimple’s board as part of the Cfius deal, reported the Hydron rumors directly to Cfius. He wanted Cfius to require that TuSimple share the names of potential manufacturing partners with the government before signing any contracts.
Cfius didn’t act in time. A month later Chao traveled to San Diego and announced Hydron’s launch just hours after attending his final TuSimple board meeting.
TuSimple’s board launched an internal investigation. Company / government officials concluded TuSimple had, in effect, shared all the US unit’s valuable technology with entities.
Investigators were also alarmed by evidence that TuSimple had been sending the data its trucks collected on US roads to at least 7 different contractors in China for processing. Cfius permitted this, but the info could help others train their own models as well as provide them with insight into critical infrastructure in the US.
In Oct 2022, CEO Hou revealed, under pressure from investigators looking into Hydron, to the board that he’d received two interest-free loans totaling $3.5M from the aide to Chao who’s also on Hydron’s board.
TuSimple’s board fired Hou. He then agreed to participate in a Chao-endorsed plan to fight back that included ceding his voting power to TuSimple co-founder Mo Chen, who used their combined voting power to engineer a board coup that included the firing of Werner, the Cfius liaison.
In the coming years, TuSimple would cease its US trucking operations, delist from Nasdaq, decamp to Beijing, rebrand as gaming company CreateAI and begin transferring $1B in cash + investments to China — with few repercussions from the US.
In May 2024 TuSimple agreed to pay a $6M fine to Cfius to resolve the panel’s investigations into the firing of Werner and whether there’s any improper tech transfer — w/o admitting fault, saying the info it shared with entities wasn’t forbidden by the Cfius agreement. A related, yearslong SEC probe remains unresolved.
Hou sued Chen in Delaware in a bid to reclaim his voting power in TuSimple. A Delaware Chancery Court judge rejected the case in an Oct 31 ruling and said evidence showed that a “Sina bloc” including Chao and Chen remained involved in TuSimple despite the Cfius agreement meant to limit their influence.
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