Canadian authorities revealed in a Vancouver court on Friday that the U.S. had asked them to arrest Meng Wanzhou, the chief financial officer of the Chinese tech giant Huawei, on charges of sanctions fraud. Meng allegedly deceived U.S. financial institutions into processing transactions that violated American sanctions against Iran, Canadian prosecutors said.
Meng was arrested while transferring flights in Canada on Saturday, the same night that President Trump and President Xi Jinping struck a 90-day truce on the trade war between the U.S. and China at the G20 summit in Buenos Aires.
The arrest sent shockwaves through financial markets and the international community when it became public on Wednesday. Meng is a prominent tech executive and the daughter of the founder of Huawei, a company with close ties to the Chinese government. The U.S. Department of Justice had declined over the past few days to specify the reason for Meng’s arrest.
Canadian prosecutors told the court that the U.S. believes that Meng had been obscuring ties between Huawei and SkyCom, a Hong-Kong-based company that was reportedly selling U.S.-made technology to Iran. The U.S. Commerce and Treasury departments forbid technologies developed in America from being shipped to Iran. Meng allegedly informed an unnamed financial institution during a presentation that Skycom and Huawei were separate entities. Prosecutors claim that Skycom was an unofficial subsidiary of Huawei. Meng could face up to 30 years in prison if found guilty of the charges.
The arrest is sure to complicate current negotiations between the U.S. and China to end the trade war before the 90-day truce is over. Xi is attempting to persuade Trump to loosen tariffs on $200 billion of imports from China, while Trump is attempting to get Xi to lower trade barriers and open China’s economy further to American companies. CNN reported that some officials in the Trump administration believe that Meng could be used as leverage during the negotiations.
The stock market fell on Thursday in reaction to the arrest, with the S&P 500 down as much as 2.9 percent, before rebounding and then dropping again on Friday.
Meng’s lawyer offered two Vancouver properties to make a cash deposit for her bail and contended that she would not embarrass her father, Huawei, and China by violating a court order. Prosecutors argued that Meng is a flight risk and should be held without bail awaiting possible extradition by the U.S. The U.S. Justice Department has 60 days to present evidence and make a request for extradition.