Daijiworld Media Network - Washington
Washington, Feb 27: Democratic senators have raised conflict of interest concerns over the involvement of Commerce Secretary Howard Lutnick’s former firm, Cantor Fitzgerald, in a major funding deal with critical minerals startup USA Rare Earth.
Sens. Elizabeth Warren of Massachusetts, Chris Van Hollen of Maryland, and Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, said in a letter dated February 25 that the transaction raises questions about whether Lutnick’s immediate family members may have benefited financially.
“It is imperative that federal investments in critical industries be made free from conflicts of interest and on the merits,” the senators wrote, requesting details about Lutnick’s involvement in the deal.
The Commerce Department issued a letter of intent last month to provide USA Rare Earth with $1.6 billion in funding to scale up its planned rare earth mining and magnet manufacturing business. As part of the arrangement, the company was required to secure at least $500 million in private capital.
USA Rare Earth selected Cantor as the “lead placement agent” for a private investment in public equity (PIPE) fundraising round that ultimately totaled $1.5 billion, according to a financial filing.
Lutnick stepped down last year as chairman and CEO of Cantor to head the Commerce Department. His son Brandon assumed the role of chairman, while his son Kyle was named executive vice chairman. Lutnick transferred his stake in Cantor to his sons and other adult children through trusts controlled by Brandon.
“We have serious concerns about the Commerce Department’s decision to enter this deal in which your former firm, run by your sons, has a clear financial interest,” the senators wrote.
They added that given Lutnick’s close ties to Cantor, and the firm’s apparent financial interest in USA Rare Earth, the department’s investment warranted close scrutiny.
The PIPE transaction structure also drew criticism. In such deals, a placement agent typically sells discounted shares to a restricted group of investors in exchange for a fee.
“If the PIPE funds were raised under these circumstances, then it appears that, in order to secure public funds from the government agency you lead, USAR paid your family’s company to raise matching private funds,” the senators said.
The lawmakers further flagged the participation of financial firms led by prominent donors to Donald Trump in the fundraising round. These included Stephen Schwarzman, co-founder and CEO of Blackstone; Ken Griffin, founder of Citadel; and Steven Cohen, founder of Point72 Asset Management.
Schwarzman donated to Trump’s super PAC, Griffin contributed to the president’s 2025 inaugural committee, and Cohen donated to his first-term inauguration, according to filings cited by the senators.
“It is unclear how or why these supporters of the Trump administration became involved in the USAR PIPE, or the extent to which they were aware of the Commerce Department’s direct investment in USAR,” the senators wrote.
A spokesperson for Citadel said the investment was made by a Citadel-managed fund and not by Griffin personally, noting that he has made donations to multiple presidents across administrations.
CNBC has reached out to the Commerce Department, Blackstone and Point72 for comment.
The senators’ letter seeks details on when Lutnick became aware of Cantor’s role in representing USA Rare Earth during the fundraising round and whether he or the Commerce Department had any involvement in the process.