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The top executives of Moonshot AI, a prominent Chinese artificial intelligence (AI) startup, are reportedly engaging in discreet settlement negotiations to resolve a legal dispute with former shareholders ahead of its planned initial public offering (IPO) in Hong Kong.
According to a Reuters report on December 12 (local time), AI software developer Recurrent and several investors have been demanding compensation from Yang Zhilin, CEO, and Zhang Yutao, CTO, both co-founders of Moonshot, over alleged misconduct. Recent discussions between the management of both parties suggest that settlement talks are underway.
Moonshot had previously confidentially submitted its listing application to the Hong Kong Stock Exchange, buoyed by the popularity of its flagship model, ‘Kimi.’ An informed source indicated that while the ongoing dispute might not derail Moonshot’s listing plans entirely, an unresolved situation could complicate the IPO process by introducing risks related to governance, equity rights, and disclosure for prospective investors.
▲ The Conflict: Allegations of Unauthorized Founding and Data Transfer vs. Denials
The dispute, currently undergoing arbitration in Hong Kong, has been ongoing since 2024.
Yang Zhilin and Zhang Yutao co-founded Recurrent in 2016 before establishing Moonshot in 2023. Corporate records show they still maintain director positions within Recurrent’s holding company.
According to a letter dated March 11, obtained by Reuters, Recurrent’s legal counsel claimed that Yang Zhilin and Zhang Yutao founded Moonshot without board approval, misled investors, causing damage to Recurrent, and gained unjust enrichment.
The letter also alleged, without presenting specific evidence, that servers containing core large language model (LLM) data were illicitly transferred to a Moonshot subsidiary in April 2023, and key data was deleted under Zhang Yutao’s direction in September 2024.
Furthermore, Recurrent is reportedly considering a separate lawsuit in the Cayman Islands court against Zhang Yutong, President of Moonshot, who received Moonshot shares after stepping down from Recurrent’s board in 2022.
Recurrent alleges that President Zhang acquired these shares for personal gain without shareholder knowledge.
Conversely, David Morrison, Senior Partner at MinterEllison, the law firm representing Moonshot, stated in November 2024 to Chinese media that “this case has no legal or factual basis,” indicating a strong intent to fight the allegations.
CEO Yang Zhilin also denied all accusations of unjust enrichment via his personal WeChat account in 2024, claiming that the Recurrent board had agreed to Moonshot’s establishment and that President Zhang Yutong’s compensation was based on his expertise.
▲ Compensation Claims Exceed $700 Million; Governance Issues Cloud IPO
Recurrent was initially allocated 9.5% of Moonshot’s founding shares. Recurrent and the involved investors are seeking compensation equivalent to 10.5% of Moonshot’s founding shares through this dispute.
According to sources, this amounts to over $700 million (approximately 1 trillion Korean Won), based on Moonshot’s corporate valuation of $30 billion in its June funding round.
Headquartered in Beijing, Moonshot, alongside DeepSeek and others, is considered a key Chinese AI player challenging giants like OpenAI and Anthropic in the U.S. It has successfully established itself in the market with its ‘Kimi’ chatbot, which excels at processing long documents. After securing investment from Alibaba, it has expanded its business into coding, reasoning, and agent AI products. Tencent, Meituan, and China Mobile are also major shareholders.
In July, Moonshot unveiled ‘Kimi K3,’ a model with 2.8 trillion parameters, claiming it to be the world’s largest open-weight AI system and comparable in performance to Anthropic.
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