On May 13, 2024, President Biden issued an Order blocking the purchase and requiring the divestment of Chinese-owned real estate that is the location of a cryptocurrency mining facility near F.E. Warren Air Force Base, a Minuteman III strategic missile facility outside of Cheyenne, Wyoming. The Order is the first instance of Presidentially ordered divestment of property interests in real estate pursuant to the Foreign Investment Risk Review Modernization Act of 2018 ("FIRRMA"), which expanded the jurisdiction of the Committee on Foreign Investment in the United States ("CFIUS") to review certain real estate transactions.
Details of the Transaction and the Order
The Order involves a June 2022 real estate purchase by a group of entities (the "Purchasers"), including MineOne Partners Limited, which are ultimately majority-owned by Chinese nationals. Since acquiring the real estate, the Purchasers have developed it for use as a cryptocurrency mining operation. The Purchasers' acquisition of the real estate was not voluntarily submitted to CFIUS, and CFIUS began investigating the transaction after receiving a public tip.
Pursuant to FIRRMA, CFIUS can review certain real estate transactions conducted near designated sensitive facilities. In the case of F.E. Warren Air Force Base, certain real estate transactions within 99 miles of the base fall within CFIUS's jurisdiction. The base hosts the US Air Force's 90th Missile Wing, which maintains and operates approximately 150 Minuteman III nuclear intercontinental ballistic missiles, and the land parcel at issue is located approximately one mile from the base.
CFIUS conducted an investigation of the acquisition and concluded that it presents surveillance and espionage risks to the national security of the United States, both due to the close proximity to the base and the foreign-sourced, specialized equipment now located on the real estate. To address these risks, the Order requires divestment of the real estate within 120 days and removal of all equipment and improvements within 90 days. It also blocks physical and logical access to the real estate and the facility by the Purchasers except to carry out the Order's requirements. The Purchasers must also make weekly certifications to CFIUS describing the removal efforts and attesting that they are in compliance with the Order.
Significance of the Order
The Order represents the first divestment of interests in real estate ordered by the President under FIRRMA authorities and reflects an increased focus on foreign real estate investment as a national security risk. This follows the scrutiny which accompanied CFIUS's 2022 determination that it did not have jurisdiction over Fufeng Group's real estate purchase near Grand Forks Air Force Base in North Dakota.
It is also notable that the transaction was not submitted to CFIUS for review at the time of acquisition. Assistant Secretary of the Treasury for Investment Security Paul Rosen noted this in a statement: "If CFIUS parties are unwilling or unable to fully address national security risks, CFIUS won't hesitate to exercise the full scope of its authorities, including Presidential referrals, to address the risk."
Parties to real estate transactions by foreign investors involving property near sensitive sites should take note of this Order and take steps early in the transaction process to address possible CFIUS risks, including considering voluntarily filing with CFIUS prior to closing.
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