FTC Chair Lina Khan's Fight For American Genomics Industry Against Incestuous Illumina Part 3
When is an acquisition a national security threat?
We’ve spoken at length about the problems at Illumina. Please read Part 1 and Part 2.
It seems interesting and worthy of notice, doesn’t it that the Intel CEO, Illumina CEO, and Microsoft founder all had relationships with subordinates.
Intel produces microchips. Illumina produces genomics sequencers. Microsoft hosts the Azure cloud. All three have come under pressure from Chinese operations.
It’s fascinating how these networks operate, especially when we consider that GRAIL — heavily backed by Chinese investors — was a target of acquisition by Illumina.
Could it be that GRAIL was a Trojan horse designed to infect Illumina?
The DeSouza-Thompson Microsoft circle.
One thing that now becomes very noticeable when DeSouza and Thompson are looked at closely is the pronounced Microsoft connections they enjoy. DeSouza has either hosted the likes of Bill Gates (along with Obama), or else has appeared on podcasts by Reid Hoffman of Linkedin and Microsoft. Hoffman it should be noted is another individual with extensive links to the CCP as well as the MIT Media Lab where DeSouza first worked.
All of this raises the question of what separation exists between DeSouza and Thompson as they seem to be part of a specific network involving multiple members of the Microsoft board and they have had significant overlap in their work history.
Thompson became a director at Illumina a mere year after deSouza became the CEO.
When this is considered in line with Thompson’s own comments that he considers the role of the board and chairman to be one of not constraining the CEO, it hard not to conclude that Thompson’s has been placed in some sort of position to act as cover for DeSouza’s actions. 12:53 mark.
Francis DeSouza: A History of Ethically Dubious Behaviour
The Desouza Bitcoin Divorce
As an individual, Francis DeSouza has repeatedly demonstrated character which is unbecoming a CEO of Illumina.
In January 2013, Francis DeSouza was served with a petition for dissolution of marriage along with a restraining order prohibiting him from:
[t]ransferring, encumbering, hypothecating, concealing, or in any way disposing of any property, real or personal, whether community, quasi-community, or separate, without the written consent of the other party or an order of the court, except in the usual course of business or for the necessities of life.
In apparent flagrant disregard for this restraining order (a disregard of legal systems also demonstrated in the purchase of Grail) Desouza initiated three Bitcoin-related transactions, two of which were inexplicably through intermediaries.
On April 9, or 10, 2013, Desouza wired $45,000 to the MT. Gox exchange for the purchase of Bitcoin, yet did not receive the Bitcoin nor retrieve the funds.
On April 10, 2013, Desouza had Wences Casares purchase 558.32 Bitcoins for a total of $99,451 from the MT. Gox exchange.
In April 12, 2013, Desouza had his friend, and his brother’s cofounder at Ample Inc., Khaled Hassounah, purchase 498.89 Bitcoins for a total of $44,940 from MT. Gox. These Bitcoins were not fully transferred to Francis DeSouza’s wallet.
In these transactions, Desouza demonstrated general negligence and poor judgement by not only failing to withdraw the Hassounah purchased Bitcoins from the Mt. Gox exchange in a timely fashion, but in also failing to disclose the $45,000 transfer from the first transaction in the divorce disclosures thereby breaching his fiduciary duty. Why exactly Desouza conducted these transactions in such a way is also a question which deserves answers.
It is also notable that Wences Casares provides yet another link between the Microsoft board and DeSouza, especially in the figures of Reid Hoffman and Bill Gates, again, as Casares has been cited as having persuaded them to invest in Bitcoin at “gatherings of the rich and famous in Sun Valley and elsewhere.”
Inappropriate Relationship with a Subordinate
At present, it appears to be the case that Francis Desouza has engaged in a sexual relationship with a subordinate at Illumina which is clearly unbecoming of a CEO of the company.
It goes without saying that such a relationship represents a serious lack of judgement as it is a relationship that is inherently fraught with issues of how consensual such a relationship can be given that the superior (DeSouza) was in a position to profoundly affect the employment of the subordinate in question. Even in the instance of a perceived consensual relationship by all parties, there is always the nagging potential that the power imbalance did influence the decision of the subordinate to engage in sexual acts, regardless.
There are credible reports that this affair (conducted before DeSouza finalised his divorce) became public knowledge at Illumina. If this is so, it would be a good question to ask if the board was aware of this lapse in judgment, and what actions they took, if any. This is clearly something that demanded a serious investigation.
It is clear, however, that this Illumina board, chaired by Thompson, is in no position to conduct this investigation given Thompson’s extensive personal and proffesional connections to DeSouza, as well as his history of poor handling of inappropriate behaviour by board members.
For example, in 2019 it was discovered that Bill Gates had engaged in an affair with a subordinate in 2002. In response, John W. Thompson appears to have engaged in an attempt to hide the presence of an inquiry into Gates behaviour from members of the board not directly aware of the inquiry, an action which was noted as being very unusual for this kind of incident.
The Grail C Round and China
Following the ensconcing of Francis DeSouza as CEO in 2016, and John W. Thompson as chairman in 2017, we find that Grail raised a $300,000,000 C series funding round in May 2018. A fund raising round which raise some very serious questions given that every single company involved in this round is either 1) a state owned fund, 2) connected to the various Wu Xi companies founded by Dr. Ge Li, 3) prolific investors in the Chinese security state, or 4) deep supporters of the CCP.
ICBC International Securities Limited
ICBC International Securities Limited is a subsidiary of Industrial and Commercial Bank of China (ICBC), a Chinese state owned commercial bank.
ICBC has been involved in various activities that have brought scrutiny including being a major renter of office space at Trump Tower as well as providing funding for the Gibe III dam in Ethiopia.
China Merchants Securities
China Merchants Group indirectly holds 45.88% equity in China Merchants Securities Co. Ltd through its subsidiaries of Shenzhen Jisheng Investment Development Co. Ltd, Shenzhen Zhaorong Investment Holdings Co. Ltd, and China Merchants Steam Navigation Company Limited.
China Merchants Group is an international state-owned enterprise (SOE) of the People's Republic of China. The company operates under the auspices of the Chinese Ministry of Transport
China Merchants Group has, like ICBC, been involved in numerous controversies including its role in managing the port of Djibouti and the funding of the Hambantota Port in Sri Lanka, both of which have been linked to the Chinese military.
CRF Investment
CRF Investment Holdings Company Limited, appears to be an exempted company incorporated in the Cayman Islands and is wholly-owned by China Reform Conson Soochow Overseas Fund I L.P.(managed by CDG Capital), which is a China-related overseas investment firm specializing in healthcare, industrials, and TMT sectors. Its portfolio companies in healthcare sector include Innovent, Akeso, RemeGen, MicroPort CardioFlow, Grail, Huahui Health,etc.
CRF Investment Holdings is itself a subsidiary of CRF EV Tech PTE Ltd incorporated in Singapore.
Both companies appear to be offshoots of some form of the China Reform Holdings Corporation Ltd (CRHC) which is a wholly state-owned investment company that invests in national security infrastructure. Investments by CRHC have raised issues in numerous areas, such as in the case of Imagination Technologies in the UK.
This begs the question of why this fund has used so many shell companies (in Singapore, then in the Caymans) to invest in Grail.
Huangpu River Capital
Huangpu was an investor in Wuxi Apptec, a company run by Dr. Ge Li
Hillhouse Capital Group
Major funder of Yitu Limited, a facial recognition and AI chip development company identified as part of the Chinese military-industrial complex by the US treasury department in 2021.
It was also an investor in WuXi Apptec.
It is also a major investor in Longi, a solar panel company banned from exporting to the US over allegations of ties to slave labor in Xinjiang in 2022.
Blue Pool Capital
Blue Pool Capital is the family office of Joe Tsai, the co-founder of Alibaba.
Tsai has been the subject of stringent criticism for his connections to the Chinese government as well as his investment in technology used in Xinjiang.
Tsai has been a strong defender of Chinese policies in the Xinjiang region.
Ally Bridge Group (ABG)
Frank Yu, the founder of ABG, is formerly of Och-Ziff (now Sculptor Capital Management). Och-Ziff rebranded in the wake revelations that it engaged in behaviour that breached the Foreign Corrupt Practices Act in nations such as the DR Congo, an area of intense interest to China, where it engaged in business with Dan Gertler.
Ally Bridge Group was an investor in both WuXi AppTec and Wuxi Biologics.
Genuity Science (previously WuXi NextCODE)
Genuity Science was formed from a restructuring of Wuxi NextCode. Wuxi NextCode was itself a spin-off of Wuxi Pharmatech, a company run by Dr Ge Li.
Genuity Science was brought by Hibercell in August 2021. Hibercell was itself funded by 6 Dimensions Capital and Hillhouse Capital.
6 Dimensions Capital
6 Dimensions Capital was formed from a merger of WuXi Healthcare Ventures and Frontline BioVentures. WuXi Healthcare Ventures was a corporate venture arm of WuXi PharmaTech, again, founded by Dr. Ge Li.
Sequoia Capital China
Sequoia is a prolific investor in technology sectors that have become an area of serious contention between the USA and China such as Yitu and the drone maker DJI. It is now claiming to employ national security experts to vet new China tech investments.
The many red flags surrounding the behaviour of companies involved in the Grail C round.
Altimeo Asset Management v. WuXi PharmaTech (Cayman) Inc. et al
On February 21, 2019, Altimeo Asset Management sued Wuxi PharmaTech, a Dr. Ge Li founded company, and the case later became a class action lawsuit. The background to the suit is as follows:
In August 2007 WuXi conducted an IPO on the New York Stock Exchange (NYSE).
On December 10, 2015 delisted from the NYSE and became a private enterprise. This was led by Ally Bridge Group
Subsequently (while a private enterprise) the company was separated into three separate entitiess: Wuxi Biologic, WuxiAppTec, and Wuxi NextCODE.
June 2017, an initial public offering (IPO) was conducted for Wuxi Biologic on the Hong Kong Stock Exchange (HKSE).
May 2018, IPO was conducted for WuxiAppTec on the Shanghai Stock Exchange (SSE).
As of the date of the court case, Wuxi NextCODE had not been part of an IPO.
As of June 2018 the value of the three companies combined following the IPOs was estimated as being in the region of $30 billion dollars. Over nine-fold the trading value of the shares of the companies prior to their spin offs.
As a result of these actions, Altimeo Asset Management alleged that:
…WuXi and the buyer group had plans prior to the merger to spin off and relist WuXi’s subsidiaries and concealed that fact from WuXi securities holders in order to depress the merger price. In support of that allegation, Altimeo cites the actual spin-offs that took place and news articles that discuss the merger, spin-offs, and surrounding circumstances.
And that:
…WuXi began “setting the stage” for relisting less than three months after the merger closed. Id. ¶ 138. WuXi Biologics completed an IP about nineteen months after the merger. Id. ¶ 141. WuXi AppTec completed an IPO about twenty-nine months after the merger. Id. ¶ 145. WuXi NextCODE has not completed an IPO, but began its series B financing round in September 2017, about twenty-two months after the merger.
The suit was ultimately dismissed because of a failure to prove that concrete plans (that were not disclosed at the time of the merger) were in place to relist the various spin offs.
Altimeo Asset Mgmt. v. Qihoo 360 Tech
In addition to this WuXi class action suit, there is also the case of Altimeo Asset Management against Qihoo 360, another Chinese company (Altimeo Asset Mgmt. v. Qihoo 360 Tech. Co., No. 19-cv-10067 (PAE), 2020 WL 4734989, at *1 (S.D.N.Y. Aug. 14, 2020).)
The details are as follows:
On December 18, 2015 Qihoo completed a merger with a group of companies (the Buyer Group.) to delist from the NYSE and take the company private. The outstanding shares were brought for a total of $9.4 billion.
On November 2, 2017, Qihoo 360 Technology Co. Ltd conducted a reverse merger with SJEC, an elevator manufacturing company listed on the SSE.
This reverse merger was completed on February 28, 2018 and by the end of the first day of trading Qihoo had a market capitalization of $62 billion. Over six-fold the trading value of the company prior to its delisting from the NYSE.
It should be noted that Neil Shen of Sequia Capital China was on the board of Qihoo 360 Tech. Qihoo, it should also be noted, was listed as a military company in 2021 by the DOD.
Whilst both WuXi case and the Qihoo 360 case were dismissed on the premise that Altimeo could not prove that concrete plans were in place to relist the subsequent companies at the time of the mergers, the dismissal of the Qihoo case has been reversed and it is currently active.
Many of the actors involved with the maneuvers which Altimeo Asset Management and other shareholders claimed led them to be deprived of a nine times increase in the value of their holdings with regard to the various Wuxi enterprises, and the six times increase in the value of Qihoo, were present in the C series funding of Grail. Among the defendants in the Wuxi suit were Wuxi Pharmatech (and Ge Li, its CEO), Hillhouse Capital, Sequoia Capital China, and Ally Bridge Capital. Whilst in the Qihoo case we find Sequoia Capital China.
China Renaissance Holdings’s Huaxing Growth Capital fund was also an investor in WuXi Apptec and it may be the case that many more of the defendant companies are connected, too.
Whilst neither the WuXi case nor the Qihoo 360 case directly match the Grail purchase with regard to the delisting and relisting of the companies in question, they do have a lot of commonalities in that overlapping groups of investors with strong connections to the Chinese state and/ or WuXi, invested in concert in very questionable ways.
In the case of Wuxi and Qihoo the investors managed to obtain great increases in their investments by the questionable delisting and relisting of stock which Altimeo claims was premeditated. With Grail the investors managed to obtain great increases in their investments by the questionable purchase of Grail by the DeSouza-led board.
This strong China connection of this funding round, when considered in light of the strong Chinese connections of chairman John W. Thompson and CEO Francis Desouza raise multiple red flags.
That so many of the investors in the C round not only appear to have been state owned, but also appear to have strong connection to WuXi (or simply were WuXi), a competitor of Illumina in the genetic sequencing sphere, merely adds even more suspiciousness to the funding round.
It is well known that the Chinese state has directed investment to the area of Genomics, and in purchasing Grail, not only did Illumina enrich a Chinese state linked competitor (the various Wu Xi companies), but it also allowed this competitor and others with a financial interest in this competitor to saddle Illumina (a US based company) with a major, on-going, financial liability.
The Grail Purchase in Context
Numerous commentators have looked at the purchase with justified confusion and bemusement. The damage it has done to the Illumina share price speaks for itself, and the further damage it will cause to the balance sheet as a result of its unwinding at an obvious serious loss is nothing short of scandalous.
Given the 1) multiple instances of questionable closeness to Chinese governance by John W. Thompson, including his involvement with businesses suspected of being involved in espionage against the US, and 2) the obvious shared network of Thompson and Desouza linked to the Microsoft board (which is itself close to the very peak of the CCP), it behoves us to ask just what exactly the Grail purchase was about?
Consider the timeline of events leading up to the purchase of Grail.
Grail begins as a start-up in 2015 with the aim of developing early cancer screening. Its parent company is Illumina.
January 12, 2016 Grail series A funding including Bill Gates, a close associate of John Thompson and Francis Desouza.
January 16 2016, Grail spins out as a separate company.
2016, Francis deSouza becomes CEO of Illumina.
March 1, 2017, Grail series B funding round including Tencent Holdings.
May 3, 2017, John W. Thompson joins the Illumina board.
May 21, 2018, Grail series C funding exclusively involving Chinese companies occurs.
May 20, 2020, Grail series D funding round.
August 2020, Grail files for an IPO.
September 2020, Illumina announces intent to buy Grail for $8 billion.
March 2021, FTC sues to block purchase and the EC investigates the potential purchase.
May 2021, Jay Flatley steps down as chairman. Replaced by John Thompson.
August 2021, Illumina purchases additional personal liability insurance for the board and then, incredibly, acquires Grail in the face of legal opposition from both the FTC and European regulators.
Whilst the purchase of Grail by Illumina has severely harmed the shareholders of Illumina, it has greatly enriched not only associates of the board in the shape of Bill Gates, but it also greatly enriched multiple Chinese linked entities and actors linked to WuXi.