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Exclusive: US opens national security investigation against TikTok sources



NEW YORK / BEIJING / WASHINGTON (Reuters) – The US government has issued a national security clearance of TikTok's Beijing ByteDance Technology Co to acquire $ 1 billion worth of US $ 1 million social media app Musical.ly. Dollars, two people familiar with the matter.

FILE PHOTO: The logo of the TikTok application can be seen on the screen of a mobile phone in this image from February 21, 2019. REUTERS / Danish Siddiqui / Illustration / File Photo

While the $ 1 Billion Acquisition Completed Two Years Ago In recent weeks, the US legislator has called for a national safety investigation into TikTok. The Chinese company may censor politically sensitive content and raise questions about the storage of personal information.

TikTok is enjoying increasing popularity in trade and technology transfers among US teenagers in times of mounting tensions between the United States and China. About 60% of TikTok's 26.5 million monthly active users in the US are between 16 and 24 years old, the company said earlier this year.

The Foreign Investment Committee in the United States (CFIUS), which reviews contracts of foreign acquirers for potential national security risks, has begun to review the agreement with Musical.ly. TikTok did not obtain permission from CFIUS to acquire Musical.ly, which gives the US security panel the opportunity to investigate it now.

CFIUS is in talks with TikTok on measures it could take to avoid divesting Musical.ly's assets it has acquired. Details of these discussions, which CFIUS calls damage mitigation, could not be found out. The specific concerns CFIUS has also failed to be learned.

Sources have requested anonymity because CFIUS reviews are confidential.

"While we can not comment on ongoing regulatory processes, TikTok has made it clear that we have no higher priority than to gain the trust of users and regulators in the US. This includes cooperation with the congress. Said a TikTok spokesman. ByteDance did not respond immediately to a request for a comment.

The US Treasury Department chairing CFIUS did not immediately respond to a request for comment.

Last week, Chuck Schumer, chairman of the US Senate Minority, and Senator Tom Cotton requested a national security clearance. They said they were worried about the collection of user data through the video sharing platform and whether China is censoring content seen by US users. They also suggested that TikTok could be targeted by campaigns with foreign influence.

"With more than 110 million downloads in the US alone, TikTok is a potential threat to counter-intelligence that we can not ignore," Schumer and Cotton wrote to Joseph Macguire, acting director of national intelligence.

TikTok lets users create and share short videos with special effects. The company stated that the US user data is stored in the US. However, the senators found that ByteDance is subject to Chinese law.

TikTok also says that China is not responsible for the content of the app, which is not operated in China and is not influenced by any foreign government.

Last month, the founder of Musical.ly, Alex Zhu, who heads the TikTok team, began reporting directly to ByteDance CEO Zhang Yiming, sources said. Previously, he reported to Zhang Nan, head of ByteDances Douyin, a Chinese short video app. It was not clear that this step, which separates TikTok from the other equity investments of ByteDance, is related to the company's discussions with CFIUS about mitigation.

In October, US Senator Marco Rubio asked CFIUS to review the acquisition of Musical.ly by ByteDance. He raised questions about why TikTok had "few videos of the Hong Kong protests that have dominated international headlines for months."

Even Facebook boss Mark Zuckerberg, whose product competes with TikTok, especially for younger users, criticized the app about censorship concerns.

The United States has increasingly appraised app developers about the security of their personal information, especially if it involves US military or intelligence personnel.

Chinese gambling company Beijing Kunlun Tech Co Ltd announced in May that it would try to sell its popular gay dating app Grindr after it was approached by CFIUS with national security concerns.

Last year CFIUS forced China's Ant Financial to reject plans to buy MoneyGram International Inc due to concerns over the security of data that could be used to identify US citizens.

The panel also forced Oceanwide Holdings and Genworth Financial Inc to consult with a US data administrator to ensure that the Chinese company could not access the personal data of the insurer's US clients.

BYTEDANCE'S RISE

ByteDance is one of the fastest growing startups in China. It owns the country's leading news aggregator, Jinri Toutiao, as well as TikTok, which has attracted celebrities such as Ariana Grande and Katy Perry.

ByteDance is backed by Japanese technology giant SoftBank, venture firm Sequoia Capital, and large private equity firms such as KKR, General Atlantic, and Hillhouse Capital Group.

Analysts see ByteDance as a major threat to other Chinese technology companies, including social media and gaming giant Tencent Holdings Ltd and search engine leader Baidu Inc. ByteDance's apps worldwide have 1.5 billion active monthly users and 700 million active daily business users said in July.

The seven-year-old Chinese start-up reported better-than-expected sales of over $ 7 billion in the first half of 2019 and was estimated at $ 78 billion at the end of last year, sources Reuters said.

Greg Roumeliotis and Echo Wang reporting in New York, Yingzhi Yang in Beijing and Alexandra Alper in Washington, D.C .; Editing by David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

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