Robinhood’s new Chinese competition forces Congress’ hand to demand more information
In the world of no-fee and low-fee brokers, Robinhood is the leader, but it’s facing increasingly stiff competition from an upstart known as Webull, founded by one of the top executives from Chinese-based e-commerce giant Alibaba.
And it’s Webull’s ties to China — seen increasingly as a US adversary — that could pose a major roadblock to the company’s ambitious plans for expansion, The Post has learned.
As The Post has reported, Congress has been demanding information about how US securities regulators are overseeing Webull’s safekeeping of customer data.
Now a group of attorneys general from red states have launched a probe into the company’s ties to the mainland and its ruling Chinese Communist Party, or CCP.
The incoming Trump administration, and the China skeptics he’s nominated in Marco Rubio as secretary of state, Matt Gaetz as AG, and whoever gets the nod for Treasury, will likely turn up the heat even more, I am told. People close to the matter say the interest from various government entities comes amid an apparent delay in Webull’s plans to list on the Nasdaq through a special purpose acquisition company, or SPAC.
A spokesman for Webull and the firm’s outside counsel at WilmerHale in DC didn’t return numerous emails and calls for comment.
The concerns echo some of the issues US regulators have with uber-popular China-owned short-video app TikTok — worries the CCP 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.
Rougher treatment
In 2021, Trump left office before he could do anything substantive with TikTok. (He settled on a forced sale to a US company, Oracle, run by his friend Larry Ellison, that never materialized). Joe Biden actually signed a TikTok ban, set to go into effect in January, a day before he leaves office.
Now that Trump has returned to DC, at least rhetorically, he has backed off his initial animus, looking to win over younger voters that form the core of its user base. TikTok might well get a Trump pardon since he sees it as the lesser-of-two evils in the social-media space dominated in part by Mark Zuckerberg’s progressive and MAGA-content throttling Facebook. (TikTok and a Trump transition team rep didn’t return requests for comment.)
Webull could be in for rougher treatment by the new administration, and both the GOP-controlled House and Senate, because of the type of information it could conceivably take from customers. TikTok’s alleged surveillance of biometric identifiers seems a bit obtuse. On the other hand, when you open a brokerage account, you’re obviously handing over sensitive personal information, like Social Security numbers, which can be used for more nefarious spy-craft schemes.
And Webull has been opening US-based brokerage accounts in droves. Research from various sources shows that Robinhood controls the largest share of the no-fee, low fee brokerage marketplace, while Webull is making significant inroads domestically. Traders say it offers pretty sophisticated investing tools, it’s analytics are sound, and the platform runs pretty seamlessly.
AGs investigating
Like TikTok, Webull has denied misusing customer data, though US officials aren’t convinced. In April, the red state AGs led by Indiana’s Todd Rokita blasted off a letter to the company’s lawyers demanding the exact details of ownership. Rokita and his fellow prosecutors sent a second one on Oct. 9, claiming that the company is stonewalling its inquiry.
“Webull’s June 2024 response does little to reassure us that the Company takes the privacy of its US customers’ data seriously and that private data is not being accessed or could not be accessed by the CCP or PRC [People’s Republic of China],” the letter, obtained by The Post, stated.
“Indeed, Webull’s apparent omissions of important information from its response raise a host of new questions and concerns. Protecting US customers’ sensitive personal and financial data is critically important, and Webull’s full cooperation with our inquiry is essential for us to ensure that such data has not been improperly disclosed to or accessed by foreign actors.”
In the past, Webull itself has seemed to offer a murky description of Chinese involvement in the company. The CEO of its US unit, Anthony Denier, told The Wall Street Journal in 2019 that Webull is “both a US and Chinese company.”
Rokita, in his letter, isn’t sold on the US part.
“Webull appears to have an affiliated research and development facility (‘R&D Facility’) with hundreds of employees in Changsha, China. SEC filings indicate that the R&D Facility may provide services or support to Webull’s US brokerage operations,” the letter said.
He added that Webull’s initial responses to the AG’s inquiry “failed to discuss at least 13 individuals identified on FINRA’s BrokerCheck website as current or former registered representatives of Webull who appear to be Chinese nationals based in Changsha, China.”
The Post has learned that Webull asked if it could have until Dec. 11 to come up with the necessary information to satisfy Rokita’s letter. A spokesman for Rokita said: “even though they’re giving us non-answers, we’re continuing to put pressure on them.”
