RareEarthDeal – Senators Raise Ethics Concerns Over $1.6B Agreement
RareEarthDeal – Democratic lawmakers are pressing for answers from US Commerce Secretary Howard Lutnick regarding a $1.6 billion rare earth minerals agreement that they say may create potential conflicts of interest involving his family and his former financial firm.
In a letter dated February 25, Senators Elizabeth Warren, Ron Wyden, and Chris Van Hollen questioned whether the Commerce Department’s tentative arrangement with USA Rare Earth, Inc. could indirectly benefit Lutnick’s immediate relatives. The senators argued that the transaction raises broader concerns about ethical safeguards within the department.
Details of the Federal Funding Agreement
Last month, the Commerce Department announced a preliminary funding package valued at up to $1.6 billion for USA Rare Earth, Inc., often referred to as USAR. The proposed support includes as much as $277 million in direct financial assistance and up to $1.3 billion in federal loans. In return, the department would receive approximately 16.1 million shares, amounting to close to a 10 percent ownership stake in the company.
On the same day the government revealed the agreement, USAR disclosed that it had secured $1.5 billion in private capital. Cantor Fitzgerald served as the lead placement agent for that fundraising effort. Lawmakers noted that the private fundraising followed closely on the heels of the federal commitment, suggesting that the government’s involvement may have strengthened the company’s financial position.
Questions About Cantor Fitzgerald’s Role
Cantor Fitzgerald, a major Wall Street firm previously led by Lutnick, played a central role in brokering the private investment round. Although Lutnick divested his ownership stake in the firm in accordance with his ethics agreement upon taking office, he transferred his holdings to his adult sons, who now manage the company.
The senators emphasized that Cantor Fitzgerald received compensation for facilitating the private transaction. They argued that the firm’s participation in a deal tied to significant federal backing warrants careful examination, particularly given Lutnick’s past leadership of the organization and his family’s current control of it.
Ethics specialists cited in the letter reportedly expressed concern that the overlapping relationships could undermine public trust. They suggested that even if formal divestment requirements were met, the appearance of a connection between public policy decisions and family financial interests could raise red flags.
Alleged Personal Involvement in Negotiations
The lawmakers also pointed to reports indicating that Lutnick may have been personally engaged in discussions related to the USAR agreement. According to media accounts referenced in the letter, Lutnick met with the company’s chief executive in November 2025 and inquired about steps needed to accelerate expansion and production.
Barbara Humpton, the company’s chief executive, was quoted in reports as saying that one of the initial conditions involved seeking private funding alongside federal support. The company ultimately completed a $1.5 billion private investment in public equity transaction concurrent with the Commerce Department’s tentative commitment.
Additionally, filings with the Securities and Exchange Commission show that several prominent investors with ties to former President Donald Trump, including Stephen Schwarzman, Ken Griffin, and Steven A. Cohen, purchased discounted shares during the private fundraising round. The senators said these transactions merit scrutiny to ensure compliance with federal ethics and disclosure rules.
Strategic Importance of Rare Earth Minerals
Rare earth minerals play a crucial role in modern technologies, including defense systems, semiconductor manufacturing, and electric vehicle production. The United States has long been concerned about its dependence on foreign suppliers, particularly China, which accounts for a significant share of global rare earth mining and processing capacity.
Strengthening domestic supply chains has been a strategic objective of the Trump administration, particularly amid intensifying economic competition with China. Federal initiatives, including programs under the CHIPS and Science Act, have aimed to expand US manufacturing capabilities and reduce reliance on overseas sources for critical materials.
The senators have asked Lutnick to respond to a series of questions by March 11. They are seeking clarification on his role in the negotiations, any guidance he received from ethics officials, and whether he complied fully with federal recusal requirements.