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In a move that has ignited fierce criticism and ethical concerns, Vulcan Elements, a rare-earth magnets startup backed by Donald Trump Jr.’s venture capital firm 1789 Capital, has secured a staggering $620 million contract from the U.S. Department of Defense. This deal, revealed by the Financial Times and echoed across major outlets, forms part of a $1.4 billion partnership involving the U.S. government and ReElement Technologies to ramp up domestic production of critical magnets used in defense technologies, electric vehicles, and renewable energy systems. The contract stands as the largest ever issued by the Pentagon’s Office of Strategic Capital, raising eyebrows about the Trump administration’s procurement practices just months into President Donald Trump’s second term.
The timeline of events fuels suspicions of favoritism. Trump Jr. joined 1789 Capital as a partner in 2024, and the firm invested in Vulcan Elements approximately three months ago, following the startup’s $65 million Series A round led by Altimeter Capital in August. Now, under his father’s administration, Vulcan has landed this windfall government support. Spokespeople for both Vulcan and Trump Jr. insist he had no involvement in contract negotiations, yet the rapid progression from investment to massive federal funding has critics labeling it a blatant example of nepotism and insider dealing.
Pattern of Government Contracts to Trump Family-Linked Firms
This isn’t an isolated incident. Reports indicate that at least four companies backed by 1789 Capital have received U.S. government contracts this year alone, totaling hundreds of millions in taxpayer dollars. The firm’s portfolio also includes high-profile defense players like SpaceX and Anduril, long-time government contractors that continue to thrive under Trump’s policies favoring military-industrial expansion. Earlier in 2025, another Trump Jr.-linked entity, Unusual Machines—a drone maker—secured U.S. Army contracts shortly after his involvement was announced, prompting ethics watchdogs to question the blurring lines between family business and public office.
Such patterns echo long-standing accusations against the Trump administration for cronyism. During Trump’s first term, similar controversies arose with family members profiting from government decisions, from Ivanka Trump’s trademarks in China to Jared Kushner’s Middle East deals. Now, with Donald Trump back in the White House since his January 2025 inauguration, the cycle appears to repeat, undermining public trust in impartial government spending. Financial analysts note that 1789 Capital has ballooned to over $1 billion in assets, partly buoyed by these politically advantageous investments.
Strategic Importance vs. Ethical Red Flags
Proponents argue the contract serves vital national security interests. Rare-earth magnets are essential for fighter jets, missiles, and submarines, and the U.S. remains heavily dependent on China for supply— a vulnerability Trump has vowed to address. The Vulcan-ReElement partnership aims to produce up to 10,000 metric tons annually, potentially reshaping the supply chain. Yet, critics contend that awarding such sums to politically connected startups bypasses more established or merit-based competitors, distorting free markets and rewarding loyalty over innovation.
Ethics experts highlight the lack of robust firewalls. Federal conflict-of-interest laws apply directly to the president, but his family members operate in gray areas, exploiting loopholes that allow indirect profiteering. Democratic lawmakers have called for investigations, demanding transparency on how Vulcan’s bid stacked up against others. The Daily Beast and Raw Story have dubbed it a “cloud of corruption,” pointing to the administration’s history of self-dealing.
Broader Implications for Trump’s Defense Agenda
Trump’s push for domestic manufacturing aligns with his “America First” rhetoric, but funneling funds to allies risks alienating bipartisan support for supply chain resilience. The Pentagon’s Office of Strategic Capital, meant to foster strategic investments, now faces scrutiny for potentially becoming a slush fund for Trump cronies. Investors watching 1789 Capital’s portfolio may see short-term gains, but long-term reputational damage to U.S. defense procurement could hike costs and erode efficiency.
As whistleblowers and media dig deeper, this story exemplifies the Trump administration’s tolerance for ethical ambiguities. With billions more in defense budgets on the horizon, taxpayers deserve assurances that contracts prioritize national interest over family fortunes. The Vulcan Elements deal isn’t just business—it’s a litmus test for accountability in Trump’s Washington.
Do you think there’s any realistic way to prevent this kind of family-connected deal-making, or is this just how U.S. politics and defense contracting are always going to work no matter who’s in office?