What X's alleged ties to Russian oligarchs mean for Musk

Court documents released last week by the US District Court for the Northern District of California shed light on shareholders and investors involved with Elon Musk's X Holdings Corp, disclosing who helped to finance his $44 billion (€40 billion) acquisition of the platform formerly known as Twitter in 2022.

The filing, obtained by the Washington Post, lists around 100 entities and individuals, including prominent Silicon Valley entrepreneurs, but also individuals that reportedly have links to Russian oligarchs.

Lawyers for the nonprofit Reporters Committee for Freedom of the Press filed a motion in July asking the court to unseal the records, on behalf of independent technology journalist Jacob Silverman.

On his website, Silverman wrote that, "I believe that people have a right to know who owns a company with such a prominent role in shaping public discourse, both in the United States and around the world."

Ties to Russian oligarchs?

One of firms listed is 8VC, a venture capitalist company co-founded by Joe Lonsdale, co-founder of intelligence contractor and data analysis platform Palantir.

8VC has invested in US defense projects with Lonsdale arguing that China's growing influence is behind his firm's move to back military startups.

Speaking at an event in March, Lonsdale said China is "building really advanced things that they're starting to compete with the US."

"That became a very scary realization to us about 10 years ago so we went hard into defense," he said.

On the fund's website, Denis Aven and Jack Moshkovich pop up in the staff section — the sons of sanctioned Russian oligarchs Petr Aven and Vadim Moshkovich. The former is co-founder of Alfa-Bank, Russia's largest private bank, and LetterOne Holdings investment company. He's been sanctioned as part of the measures imposed on Russian individuals in the wake of Russia's war against Ukraine.

Moshkovich, meanwhile, made his fortune in the agro-industrial business with his Rusagro Group company. Following Russia's invasion of Ukraine he was sanctioned by Western countries due to his alleged ties with Russian President Vladimir Putin.

There is nothing to suggest that the sanctioned fathers have any financial ties with 8VC. However, their sons' roles are likely to come under further scrutiny, as the US government is becoming increasingly wary of foreign actors' ties to the tech industry.

The National Counterintelligence and Security Center recently released a bulletin warning Silicon Valley startups about foreign players using investment deals to exploit sensitive data. 

At the time of writing 8VC had not responded to DW's request for comment.

What does the disclosure mean for X?

Knowing the ownership of a media channel that wields considerable influence with an international reach provides transparency — not only for users but also interested financial parties. So what do these ownership disclosures mean for Elon Musk and his social media platform X?

"Traditional owners such as investment funds might expect a conventional financial return. In comparison to other media, the wild west of social media channels could attract other investors who might imagine their returns coming in a different mix of ways," says Gordon Fletcher, Associate Dean: Research and Innovation at the UK's Salford Business School.

"Endorsements, access to data, algorithmic amplification of messages or enhanced filtering could all be possibilities," he told DW.

The disclosure could prove uncomfortable for some of the high-profile investors, who include Prince Alwaleed bin Talal from Saudi Arabia's ruling royal family and investment firms such as the Baron Opportunity Fund and Andreessen Horowitz.

"While the US-based tech investors were revealed early on, the wider pool of investors were not. A promise of nondisclosure would upset some who are now in the spotlight. It might be useful as leverage to negotiate a different position in relation to the company," said Fletcher. 

However, whether it will spark an investors‘ exodus from X is unclear at this stage.

"It may not be straightforward for them to sell their interests to Musk or some other buyer. The ability to sell may turn on particular investment agreements to which we're not privy," says Paul M. Barrett, deputy director of the NYU Stern Center for Business and Human Rights.

Will the revelations deter potential investors?

At this stage, it's also too early to tell whether the involvement of 8VC and specifically that of the two sons of the sanctioned Russian oligarchs might deter other venture capital funds from investing in X.

"There is an increasing pool of large institutional investors that are increasingly presenting their portfolio as being based on ethical commitments. Many of these are based on environmental rather than political concerns. But the visibility of these specific investors and their link to Russia will make some institutional investors nervous," said Fletcher.

That being said, Fletcher thinks that other international players may still be willing to invest. "There has previously been interest from different sovereign-wealth funds in making media investments of all kinds across print and digital. If the return is right (in whatever form it is promised) an investor can always be found."

Meanwhile, Barrett thinks that, notwithstanding potential ethical concerns, investors are more likely to see "X's fundamental financial instability" as a "greater deterrent, from a strictly business perspective," he told DW.

Indeed, X's financial fortunes have taken a hit in the wake of Musk's takeover financed in part by a $13 billion loan from seven leading banks. Due to Twitter's poor financial performance the platform was unable to find buyers of the debt. For 2023, the platform reported a revenue of $3.4 billion, a drop of 22% from the previous year when revenue stood at $4.4 billion.

While Fletcher says that investors and advertisers will be "considering their options carefully," Barrett is not convinced that the potential fallout from the ownership disclosures will deter advertisers.

"It's not clear to me that an advertiser that has tolerated Twitter's slide back into the swamp of extremism and hate mongering would suddenly become so disillusioned by this revelation that it would cut ties to the company," he said. 

DW was unable to reach X's communications department for comment.

Edited by: Uwe Hessler