TMTPOST -- Zhu Xiaohu, Managing Partner at GSR Ventures, addressed recent arbitration proceedings involving Yang Zhilin, founder of Moonshot AI, and Zhang Yutao, co-founder and CTO. The arbitration was filed by some of the investors from Recurrent AI, the company they co-founded before establishing Moonshot AI.

In a social media post, Zhu explained that Moonshot AI was originally a project developed internally at Recurrent for over two years. He pointed out that the spin-off had yet to receive proper shareholder approval, with the board resolution delayed for more than half a year. It wasn’t until January of this year that the resolution was signed. However, due to a significant conflict of interest on the part of one director, Zhang, Zhu believes the decision could be considered invalid.

Zhu revealed that Zhang had concealed her major conflict of interest—holding a substantial stake in the newly spun-off company. According to Zhu, Zhang held 9 million shares, which represented 14% of the company’s total shares, far surpassing the 9.5% shareholding that the investors of Recurrent AI received over two years of nurturing the Moonshot AI project. Zhu emphasized that Zhang had breached her fiduciary duties to both limited partners (LPs) and the shareholders of the company, leading to her dismissal by GSR Ventures.

Zhu further stated that this incident should become a pivotal case in the history of China’s entrepreneurial venture capital, offering key lessons on the legal and compliant structuring of company spin-offs. He stressed that fiduciary duties—whether to LPs by general partners (GPs) or to shareholders by directors—were non-negotiable lines in the venture capital world.

In response to the arbitration filing, AsianFin reached out to Zhang Yutong for comment on the matter. However, by press time, no response had been received.

Recurrent, founded in 2019 with a registered capital of 10 million yuan, focuses on AI-driven marketing and customer service solutions. It was backed by investors including GSR Ventures, Sequoia China, and ZhenFund. The company is co-led by Yang, Zhang Yutao, and Chen Qicong, who each hold 27.19% of the shares and serve as key executives.

In March 2023, Yang Zhilin co-founded Moonshot AI and introduced the Kimi AI assistant, which quickly gained attention, becoming a key player in China’s large model AI landscape. The core team behind Moonshot AI had previously contributed to major projects, such as Google’s AI advancements and the Pangu model. To date, Moonshot AI has secured over 2.5 billion yuan in funding and is valued at more than $3.3 billion.

Yang, 31, is a Tsinghua University graduate with a PhD in Computer Science from Carnegie Mellon University. He previously worked at Meta AI and Google AI, contributing to major research papers in the field of natural language processing (NLP). Yang has also played a critical role in the development of Pangu’s core technologies and co-founded Recurrent to focus on AI solutions.

In November 2024, Yang and Zhang were named in an arbitration case filed by several of Recurrent's investors, including GSR Ventures, Sequoia China, among others, over Moonshot AI’s early financing and spin-off. The case centers on allegations that Yang and Zhang began fundraising and created Moonshot AI before receiving consent from the investors.

Representatives of Moonshot AI, via their lawyers at MingDe Law Firm, have responded to the arbitration claims, stating that the matter lacks both legal grounds and factual support. They have promised to fight the claims in court.

The dispute also has wider implications for the venture capital community. GSR Ventures has not commented directly on the situation, but Zhu’s statements highlight the significance of corporate governance and transparency in investment decisions, especially regarding conflicts of interest.

The issue has also affected other key figures in the investment community. Hu Xiao and Jiang Shanshan, from Alibaba’s investment department, who were involved in financing Moonshot AI, have both been reported to have left the company. Additionally, internal dissatisfaction within Alibaba over the situation suggests deeper concerns about potential financial mismanagement or conflicts.