A pair of tech investors, with the legal backing of a former Justice Department prosecutor, have filed a civil lawsuit accusing the Trump administration of failing to enforce a law that required TikTok to either separate from its China-based owner or face a ban in the United States.
The 33-page lawsuit, which was filed Thursday in the Washington, D.C., Circuit Court of Appeals, asked the court to declare that the administration’s multiple extensions to forestall the shutdown of TikTok last year were unlawful. President Trump instead opted multiple times to grant extensions. It also argues a deal that was cut earlier this year for new investors to take over TikTok’s U.S. operations did not comply with the law.
The plaintiffs are ZhaoCheng Tan and Garrett Reid, who are investors in Google parent company Alphabet Inc. and Facebook parent Meta Platforms, respectively.
They argue in their lawsuit: “Such relentless violation of the law has harmed petitioners, who have invested in companies that compete with TikTok’s American operations. When the illegal sale was announced, petitioners suffered financially. By sanctioning an unlawful deal, the government has created a legal impediment to petitioners’ financial recovery.”
Brendan Ballou, a Justice Department prosecutor who is handling the lawsuit against the department, told CBS News his clients have “experienced a direct and very real financial harm.”
The law, which was unanimously upheld by the Supreme Court, made it unlawful for app stores to offer updates or new downloads after the Jan. 19, 2025, deadline for China-based ByteDance to divest from TikTok. But while negotiations to divest TikTok took place, Mr. Trump issued a series of executive orders every few months directing the Justice Department not to penalize the tech companies who host TikTok on their platforms, keeping the app widely available.
The law only allowed the president to grant a single 90-day extension if there was “evidence of significant progress” toward a deal that complied with the legislation.
A year after the deadline, TikTok announced in January 2026 a new U.S.-based entity had been formed to take over the app’s operations for American users. The joint venture was made up mostly of investors based in the United States, with ByteDance retaining 19.9% of the company, just below the 20% cap allowed under the law.
In their lawsuit, Tan and Reid argue the deal “facially violated the TikTok Law.”
“First, under the deal, TikTok U.S. would not own the app’s recommendation algorithm,” the plaintiffs wrote. “Rather, ByteDance would continue to own the algorithm, which it would license to TikTok U.S. In turn, TikTok U.S. would simply ‘retrain, test, and update’ the algorithm on user data stored in the United States.”
The law requires TikTok U.S. to have no “operational relationship” with ByteDance, including cooperation on the content recommendation algorithm.
The suit also argued “the deal the President approved rewarded allies.” The suit said some of the investors in the new deal include firms or executives who “have close ties to the President, and have at times personally enriched him.”
Those investors include Oracle, which was founded by billionaire Larry Ellison, whom Mr. Trump has described in the past as a “friend.” The lawsuit pointed to reports that a “$100,000-per-person” Trump fundraiser was hosted at Ellison’s home in 2020. (Larry Ellison’s son, David Ellison, is the chairman & CEO of Paramount Skydance, which is the parent company of CBS News. The Ellison Family owns a controlling interest in Paramount Skydance.)
It also mentions TikTok investors Susquehanna International Group and General Atlantic, whose leaders have donated to pro-Trump super PACs. And it points to Abu Dhabi-based investment firm MGX, which struck a deal last year that involved buying $2 billion worth of a cryptocurrency issued by a Trump family-affiliated company.
Ballou, the lead attorney in the case, now serves on the Washington, D.C.-based Public Integrity Project. The organization’s home page said it seeks to raise “the cost of corruption in America by suing the people, companies, and countries that seek to bribe government officials, as well as the government officials who seek to be bribed.”
The Department of Justice said they had no further comment. Oracle declined to comment to CBS News. Susquehanna, MGX, General Atlantic and TikTok did not respond to CBS News’ request for comment.