U.S. investors who backed ByteDance, the Chinese parent company of TikTok, find themselves increasingly ensnared in the app’s geopolitical turmoil. A bill directing ByteDance to sell TikTok is advancing through the Senate after passing the House this month, escalating concerns over whether the app’s Chinese ties pose a national security risk.

According to reporting by The New York Times, state and federal lawmakers intensify pressure on investors like General Atlantic, Susquehanna International Group, and Sequoia Capital to justify their multi-billion dollar stakes in the Beijing-based company. This scrutiny compounds existing challenges these investors face in monetizing their ByteDance holdings.

A House committee examined U.S. investments in Chinese firms last year as the Biden administration curbed such investments. In December, a Missouri pension board voted to divest from some Chinese assets after pressure from the state treasurer. Florida recently mandated its investment board to sell shares in Chinese-owned companies.

For ByteDance’s U.S. backers, their investments are “stranded assets” that will be “very difficult to make liquid,” according to Matthew Turpin, former director for China at the National Security Council. Since ByteDance remains privately held, investors cannot easily cash out their stakes. Geopolitical tensions also dim prospects for a near-term IPO.

The Chinese government appears reluctant to relinquish an influential platform like TikTok, previously blocking a deal to sell it to American buyers. Beijing condemned the recent congressional bill requiring ByteDance to divest TikTok.

U.S. venture capital firms took early stakes in ByteDance from its 2012 founding. Susquehanna, a trading company, owns about 15% after investing that year. Sequoia Capital’s Chinese branch invested in 2014 at a $500 million valuation, with its U.S. growth fund following suit.

In 2017, Private equity firm General Atlantic bought in at a $20 billion valuation, securing a board seat for CEO Bill Ford. Other noted ByteDance investors include KKR, Carlyle Group, and Coatue Management.

For years, these firms touted ByteDance as a lucrative bet, especially as TikTok’s popularity surged worldwide. Holding a stake gave firms access in China to pursue other deals in the massive market.

However, the U.S.-China relationship’s deterioration cast an unflattering spotlight on American investments in Chinese tech firms viewed as potential national security threats. Last year, Biden restricted new U.S. investment in key Chinese industries.

A February congressional probe found five U.S. venture funds, including Sequoia, invested over $1 billion in China’s semiconductor sector since 2001, aiding an industry the government now considers a risk.

“China has almost been lumped in with E.S.G.,” said Joshua Lichtenstein of Ropes & Gray, referring to environmental, social, and governance investing principles that polarize some states.

The bind echoes how Russia’s Ukraine invasion scrambled Western companies’ Russian investments, resulting in over $103 billion in losses, according to Nomura’s Jonathan Rouner.

Some ByteDance investors moved to distance themselves. Last year, Sequoia spun off its Chinese operation, now called HongShan, citing challenges in managing a global footprint. HongShan’s Neil Shen sits on ByteDance’s board.

Other backers wield political clout. Susquehanna founder Jeffrey Yass significantly funds Republican causes championing free speech, which TikTok’s critics question. General Atlantic’s Ford keeps a lower political profile.

Unless ByteDance lists publicly or is sold as the Senate bill proposes, ByteDance’s U.S. investors face prolonged scrutiny with no clear exit in sight.

“The more attention it has, the worse it means for their investment,” Turpin claims.