There have been many developments and substantial progress made by the Court-Appointed Receiver to try and help restore Link Motion to order and ultimately to try and secure a recovery for Link Motion’s shareholders. The Receiver has a dedicated team working on these goals around the clock and in all relevant jurisdictions. Updates will come as things unfold and legal proceedings are formalized.
We continue to remain actively involved in fighting for justice and for an ultimate recovery. In many regards, the advancements have been unprecedented and certainly are setting the stage for what we hope becomes an unprecedented recovery.
- China: Under the great leadership of Francis Guo, who was appointed by the Court-Appointed Receiver as Chairman of the Company, the Company’s WFOE (Wholly Foreign Owned Entity) changed its Chairman and legal representative from Zemin Xu to Francis Guo. As part of this process, the Company also was able to change its business registry and official company stamp. This was an enormous step in the right direction and set the stage for Mr. Guo to gain access to the Company’s Chinese bank accounts and begin the process of restoring order. As a reminder, Vincent Shi had maintained control of the Chinese bank accounts where the vast majority of the cash resides. It is interesting to note that even though Zemin Xu resigned from the Company as its CEO and Board Member back in September 2018, he had remained as the WFOE’s legal representative and Chairman and continues today in assisting Vincent Shi in resisting the Receiver’s efforts. However, after Mr.Guo successfully changed the WFOE leadership, Zemin Xu and Vincent Shi attempted to block this and brought a lawsuit in Beijing on the matter. The courts in China ruled on this attempted appeal by Zemin Xu and Vincent Shi and specifically ruled in favor of Mr. Guo on behalf of the Company. This was a significant first official court ruling in favor of the Receiver’s appointed Chairman. This sets the stage for more of the critical work to be done with the Company’s VIE and other legal entities where the vast majority of cash and assets reside. We are thankful for Mr. Guo’s leadership and continued efforts to work on behalf of the Receiver for all shareholders. However, China Merchants Bank Chaowai Branch has been delaying the necessary procedures associated with changing the WFOE bank account’s legal representative (including changing the legal rep for the bank account’s authorized users and signatory authority) using the excuse that it is proceeding with customer identification. Therefore, the WFOE has been unable to pay for its employee and ex-employee’s salary and social security obligations which has impacted the WFOE’s normal operations. We have asked China Merchant’s Bank and its Chaowai Branch to clarify the time needed for the customer identification procedures. We have also asked them to immediately finish the procedures to change the legal rep for the WFOE bank account. This has been ongoing since April 18, 2019. We have notified the China Merchant’s Bank that if they still permit Vincent Shi or Zemin Xu to access the WFOE bank accounts and deposits, then China Merchant’s Bank will be responsible and required to compensate the WFOE and its shareholders for any related issues. We hope that the recent court ruling in China will help speed up China Merchants Bank’s cooperation in these important matters.
- Hong Kong: There is a very important matter ongoing in Hong Kong related to an arbitration that ZhongZhi (“ZZ”) brought against the Company alleging that it has defaulted on its convertible note. This is an ongoing legal matter and we are not able to provide a detailed update. However, it is important to note that Vincent Shi attempted to simply allow the Company fall into a default ruling in this arbitration, but the Receiver was able to enter the arbitration and is now working on behalf of the Company to properly represent the Company’s interest. As a reminder, ZZ has many conflicts of interest with the Company, Vincent Shi, Tongfang and therefore the Receiver is in position to ensure that these conflicts are properly disclosed and incorporated into any such decisions related to the convertible note, the TongFang Note receivable, et al.
- United States: The judge in the derivative lawsuit action Wayne Baliga, derivatively on behalf of Link Motion Inc. against Link Motion Inc., Vincent Shi et al has referred the general pretrial matters (including scheduling, discovery, non-dispositive pretrial motions and settlement) to a magistrate judge who will hear the matters and rule on them before proceeding further. We will hope to update you more fully as this case proceeds.
Finally, we look forward to doing all we can to support the Receiver and his team in trying to restore what was lost, take back what was taken illicitly, and to find a way to recover on behalf of all shareholders.