Court documents reveal Chinese money on SpaceX’s shareholder list

SpaceX has thrived by securing sensitive U.S. government contracts, from building spy satellites for the Pentagon to launching spacecraft for NASA. U.S. embassies and the White House have also connected to the company’s Starlink internet service. Musk’s approximately 42% stake in the company is valued at an estimated $168 billion. If he owned nothing else, he would be among the 10 wealthiest people in the world.

National security law experts said federal officials would likely show considerable interest in understanding the direct Chinese investment in SpaceX. Whether there was reason for concern would depend on the details, but the U.S. government has asserted that China employs a systematic strategy of using investments in sensitive industries to conduct espionage.

If the investors gained access to nonpublic information about the company — such as details on its contracts or supply chain — it could be useful to Chinese intelligence, said Sarah Bauerle Danzman, an Indiana University professor who has worked for the State Department examining foreign investments. That “would create huge risks that, if realized, would have significant consequences for national security,” she said.

SpaceX did not respond to questions for this story. Kahlon declined to comment.

The new court records stem from litigation in Delaware between Kahlon and another investor. The testimony was sealed until ProPublica, with help from lawyers at the Reporters Committee for Freedom of the Press and the law firm Shaw Keller, moved in the spring to make it public. SpaceX opposed the effort, but a judge ruled that some of the records must be released. Kahlon’s testimony was publicly filed this week.

Buying shares in SpaceX is much more challenging than purchasing a piece of a publicly traded company like Tesla or Microsoft. SpaceX controls who can acquire stakes in it, and the company’s investors fall into different categories. The most exclusive group consists of direct investors, who actually own SpaceX shares. This group includes funds led by Kahlon, Peter Thiel, and a select few other venture capitalists with personal ties to Musk. Then there are the indirect investors, who effectively acquire stakes in SpaceX through an intermediary like Kahlon. (The indirect investors are actually investing in a fund managed by the intermediary, typically paying a considerable fee.) All previously known Chinese investors in SpaceX belonged to the latter category.

This year, ProPublica reported on an unusual feature of SpaceX’s approach to investment from China. According to testimony from the Delaware case, the company permits Chinese investors to acquire stakes in SpaceX as long as the funds are channeled through the Cayman Islands or other offshore secrecy hubs. Companies only need to proactively report Chinese investments to the government in limited situations, and there aren’t hard and fast rules for determining how much is too much.

After ProPublica’s report, House Democrats sent a letter to Defense Secretary Pete Hegseth expressing concerns about the company’s “potential obfuscation.” “In light of the extreme sensitivity of SpaceX’s work for DoD and NASA, this lack of transparency raises serious questions,” they wrote. It is unclear if any action was taken in response.

Kahlon has transformed his access to SpaceX stock into a lucrative business. His investor list reads like an atlas of the world. The investors’ names are redacted in the recently unsealed document, but their addresses span from Chile to Malaysia. One is in Russia. At least two are in mainland China. One is in Qatar. (In one email to SpaceX’s chief financial officer, Kahlon stated that a Los Angeles-based fund had money from the Qatari royal family and was already invested in SpaceX.)

“You made a big fortune,” a China-based financier wrote to Kahlon four years ago. “Lol something like that. SpaceX has been the gift that keeps on giving,” Kahlon replied. “All thanks to you.”

Kahlon first met with SpaceX when it was a young startup, according to court records. SpaceX’s CFO, Bret Johnsen, who has been there for 14 years, testified that Kahlon “has been with the company in one form or fashion longer than I have.” Johnsen also testified that SpaceX has no formal policy about accepting investments from countries considered adversaries by the U.S. government. However, he said he asks fund managers to “stay away from Russian, Chinese, Iranian, North Korean ownership interest” because that could make it “more challenging to win government contracts.”

There are indications that by 2021, Kahlon was cautious about raising funds from China. The U.S. government had become increasingly concerned about Chinese investments in tech companies, and that June, Kahlon told an associate he was “being picky” about whom he’d let invest in a new SpaceX opportunity. “Only people I want to have a relationship with long term. No one from mainland China,” Kahlon said.

But as he hurried to assemble a pool of investors, those concerns seemed to fade. By November 2021, Kahlon was personally raising money from China to buy SpaceX stakes. He informed a Shanghai-based company that if it invested with him, it would receive quarterly updates on SpaceX’s business development, “visits to SpaceX, and the opportunities to interview with Space X’s CFO,” court records show.

The Shanghai company ultimately sent Kahlon $50 million to invest in Musk’s business, according to court records. SpaceX had the deal canceled after the plan became public.