Meta’s Acquisition of Manus Withdrawal Pathway Explained: $2 Billion Must Be Refunded, Data Must Be Isolated and Deleted
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Meta’s Acquisition of Manus Withdrawal Pathway Explained: $2 Billion Must Be Refunded, Data Must Be Isolated and Deleted
Meta’s third-largest acquisition in its history was announced in December 2025 and blocked in April 2026—just four months later.
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On April 27, the Office of the Working Mechanism for Security Review of Foreign Investment under the National Development and Reform Commission (NDRC) officially issued a decision prohibiting the investment, halting Meta’s acquisition of Manus, an AI agent company.
This deal—once regarded as Meta’s third-largest acquisition in history—was announced in December 2025 and prohibited in April 2026, lasting only four months.
Key Timeline of the Manus Acquisition
In March last year, Manus was officially launched. The Monica.im team introduced the world’s first general-purpose AI agent, which immediately ignited market interest upon launch; invitation codes were traded at premium prices, and annualized revenue rapidly exceeded USD 125 million.
On December 30 last year, Meta announced its acquisition of Butterfly Effect—the parent company of Manus—for USD 3–5 billion. Negotiations lasted only about ten days, and Manus founder Xiao Hong was set to assume the role of Vice President at Meta.
On January 8, regulators initiated an investigation. The Ministry of Commerce, together with other relevant departments, launched an assessment to verify compliance regarding technology export, cross-border data transfers, and foreign investment reporting.
In March, the NDRC summoned senior executives from both parties, highlighting risks related to technology transfer and data security, and instructed them to suspend progress on the deal.
On April 27, the Office of the Working Mechanism for Security Review of Foreign Investment formally prohibited the transaction and ordered the acquisition to be rescinded and the status quo ante restored.
Rescission of the Transaction: Full Restoration—from Equity to Data
Per Article 12 of the Measures for Security Review of Foreign Investment, following a national prohibition decision, the core requirement is to restore the pre-investment status within a specified timeframe and eliminate any impact on national security. This process comprises three modules:
(I) Equity and Transaction Parties
All parties must sign a written termination agreement to rescind the acquisition and annul all ancillary documents (e.g., shareholders’ agreements, technology transfer agreements).
If Meta has already completed equity settlement, it must fully re-transfer all Manus shares back to the original shareholders or domestic entities and complete business registration changes both domestically and overseas.
Regulators will supervise the equity transfer to ensure no “de facto control” remains (e.g., via contractual control or nominee shareholding).
(II) Funds and Consideration Refund
Meta must fully refund approximately USD 2 billion already paid (including deposits and advance payments) into the designated transaction accounts.
Upon receipt, the original shareholders must return the funds via the original foreign exchange route and file reports with the State Administration of Foreign Exchange (SAFE).
Both parties must settle intermediary fees, liquidated damages, etc., and are prohibited from disguising consideration payments under names such as “compensation” or “consulting fees.”
The foreign exchange regulatory authority will monitor fund flows throughout to prevent capital flight disguised as “transaction termination.”
(III) Data and Technology Security
Data Isolation and Deletion:
Meta must delete all Manus user data, training data, and operational data obtained from within China, issue deletion certification, and submit to verification; Manus must restore localized data storage and terminate all cross-border data transmission channels.
Technology and Code Restoration:
All technology licenses and code transfers to Meta must be terminated; control over core AI technologies and algorithmic models must be reclaimed; Meta is prohibited from using any Manus technological outputs; all transferred technical documentation and code copies must be destroyed.
Personnel and Management Isolation:
All management and technical personnel dispatched by Meta must withdraw entirely; all management agreements involving control rights must be terminated to ensure full autonomous governance by the domestic entity.
Core Reasons: Violation of Three Red Lines
1. Technology and Data Security
Manus’s core technologies were developed domestically by a team of Chinese nationals. During the transaction, the corporate structure was relocated to Singapore—a move subjected to close regulatory scrutiny for possible “technology laundering” or circumvention of China’s technology export controls. Core algorithms, training data, and user data risked flowing overseas through the acquisition, directly threatening data sovereignty and technological security.
2. Non-Compliance in Foreign Investment M&A
Although structured as an “acquisition of a Singaporean enterprise by a U.S. company,” this deal effectively involved foreign acquisition of indigenous Chinese AI technology via offshore restructuring—without undergoing China’s security review for foreign investment. Regulators determined this constituted a classic case of “cross-border M&A designed to bypass security review.”
3. Regulatory Evasion Through Structural Reorganization
The Measures for Security Review of Foreign Investment explicitly require security review filings for foreign M&A involving critical technologies and data. Manus attempted to shift control via the “domestic R&D + offshore shell + foreign acquisition” pathway without filing for review—rendering the transaction invalid.
Regulatory Oversight and Subsequent Constraints
Parties concerned must complete all required actions within the timeframe stipulated by regulators. The Office of the Working Mechanism for Security Review of Foreign Investment will coordinate with NDRC, MOFCOM, the Cyberspace Administration of China (CAC), SAFE, and other agencies to conduct on-site inspections and confirm full restoration of the pre-transaction status.
Failure to comply may result in penalties—including fines, restrictions on domestic operations, and bans on engaging in foreign investment activities—while responsible individuals may face legal liability.
More importantly, Manus and its original shareholders must fulfill statutory procedures—including foreign investment security review and security assessment for data出境—in all future cross-border collaborations or financing activities, and must not again transfer control, data, or technology overseas through regulatory evasion.
No More Gray Zones in AI Cross-Border M&A
This prohibition decision is not aimed solely at an isolated case but establishes clear boundaries for the AI industry:
Specifically, it prohibits the “domestic R&D + offshore shell + foreign acquisition” pathway outright; cross-border M&A in the AI sector must undergo full security review and data assessment; and control over AI technologies developed within China must not be transferred overseas without prior review.
For Meta, termination of the acquisition means missing out on critical AI agent technology assets, and all paid funds must be fully refunded; for the Manus team, it means restoring control to the domestic entity, terminating all cooperation with Meta, and returning to compliant domestic operations.
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