U.S. Treasury Reviews Benchmark Capital’s $75 Million Investment in Chinese AI Startup Manus AI

According to TechCrunch and Semafor, the U.S. Treasury is reviewing Benchmark Capital’s $75 million investment in Chinese AI startup Manus AI, reflecting escalating tech competition between the United States and China.

The inquiry asks whether the deal falls under the new “foreign‑investment‑security” rules that require reporting of investments that could accelerate or enhance sensitive technologies such as artificial intelligence.

The regulations stem from the 2023 “Foreign Investment Security Plan” signed by President Biden and only became effective earlier this year, obligating U.S. persons to notify the Treasury when investing in critical‑technology sectors.

Both Benchmark and the Treasury declined to comment, and Manus did not respond to requests for comment.

The review comes amid tighter scrutiny of U.S. tech ties with China; although the United States has long led AI, China is rapidly catching up, publishing more papers and releasing powerful models such as DeepSeek R1, which has pressured U.S. AI stocks.

Manus’s March demo video, dubbed the “second DeepSeek moment,” showed its AI agents autonomously completing complex tasks, from research to generating mobile apps and websites.

Benchmark’s lawyers, from several large U.S. firms, argue the investment is not covered by the restrictions for several reasons: Manus does not train its own models but merely wraps existing ones; its parent “Butterfly Effect” is incorporated in the Cayman Islands; its staff are distributed across the U.S., Singapore, Japan and China; and all data are stored on offshore cloud servers operated by Western companies.

Nevertheless, some Silicon Valley figures have questioned the deal, with Lux Capital co‑founder Josh Wolfe calling it “nonsensical” on X and Founders Fund partner Delian Asparouhov noting that Benchmark’s partners “do have foreign interests.”

The Treasury’s probe follows internal criticism of Benchmark’s investment; the agency has asked Benchmark to explain how the deal complies with the new rules or why it falls outside the agency’s jurisdiction.

Sources say Benchmark has not yet replied, but expects to argue that no filing is required because Manus does not advance AI frontier development in China, merely uses pretrained models from Anthropic, Alibaba and others with limited fine‑tuning.

The Treasury has yet to test the new rules in practice, so the outcome of this case remains uncertain.