Exclusive | Kimi Arbitration Settlement Fails, Zhang Yutong May Face Separate Lawsuit

By Lili Yu

Edited by Jing Liu

AnYong Waves has learned exclusively that the long-stalled Kimi arbitration case has not reached a settlement as some had expected, but has instead moved to the next phase of proceedings.

According to people familiar with the matter, both parties in the Kimi arbitration — the former shareholders of Recurrent AI and Yang Zhilin's side — completed their fee payments to the HKIAC (Hong Kong International Arbitration Centre) in late January and late February respectively, and the tribunal has now been formed. The more pivotal figure behind the entire dispute, Zhang Yutong, may face a separate lawsuit. Another investor close to the negotiations revealed that after Allen Zhu's public condemnation and Yang Zhilin's open letter response, Yang had briefly come out to negotiate with the former shareholders, expressing willingness to transfer some equity, including a small portion from Zhang Yutong — suggesting that Kimi was not willing to cut ties with her.

But this figure clearly fell short of what Recurrent AI's former shareholders expected. An investor close to both sides told us that Kimi's side initially proposed 20% equity, equivalent to an additional 10% on top of the previous arrangement, but that the equity they were now willing to part with "amounted to a steep discount." In a sense, both of these factors contributed to the former shareholders' decision to press ahead with the lawsuit. Additionally, sources said that despite Yang Zhilin's statement in his December 6 open letter that he had completed all necessary procedures to leave Recurrent and start anew, the former shareholders disagreed. This remains the central point of contention in the case.

As for Zhang Yutong, an investor close to Recurrent AI's former shareholders said they would likely file a separate lawsuit against her, believing she "completely violated her fiduciary duty — the initial 9 million free shares were entirely ill-gotten gains, and she took another 3 million shares after the Series A." Furthermore, the Kimi-related case was brought to the Hong Kong International Arbitration Centre because of contractual agreements with the founders, but Zhang Yutong falls outside this scope, making a separate lawsuit in Cayman courts more likely.

On November 11, 2024, Kimi founder Yang Zhilin and co-founder & CTO Zhang Yutao were arbitrated by Recurrent AI and five of its seven investors — GSR Ventures, Jinya Capital, Boyu Capital, Huashan Capital, and Wam Capital. The reason: Yang Zhilin, Zhang Yutao, and others had launched fundraising and founded Moonshot AI before obtaining consent waivers from their previous investors.

Afterward, an even more central figure in the entire affair gradually came to light: former GSR Ventures managing partner Zhang Yutong, who was both Recurrent AI's first angel investor and a key driving force behind Kimi/Moonshot AI's Alibaba financing round.

In the view of Allen Zhu, GSR Ventures' managing partner, the portion concerning Yang Zhilin and Zhang Yutao was the easier part to resolve. He explicitly told us that if the two were willing to cut ties with Zhang Yutong, they "would be willing to waive claims against them and support the young people in pursuing their AGI dreams." At the same time, he insisted on isolating Zhang Yutong, because she "violated her fiduciary duty."

On the evening of December 6, Kimi founder Yang Zhilin issued an open letter stating that before founding his new company, he had completed all necessary procedures to leave Recurrent in accordance with the company's transaction documents. He also confirmed Zhang Yutong's status as a co-founder of Moonshot AI and the fact that she received shares on a multi-year vesting schedule.

Zhang Yutong, at the center of the media storm, never responded. But on February 11, she made a rare appearance on social media and WeChat Moments, expressing her delight that Kimi's new version had hit record user numbers after its launch.

Some AI investors saw this as "a reaction to the DeepSeek shockwave."

During the period when the Kimi lawsuit lay dormant, the AI landscape had already shifted dramatically. If Kimi's early rival was Doubao, with which it clashed head-to-head in the consumer market, the player now delivering the biggest blow to Kimi is DeepSeek's explosive emergence.

Though Kimi's recently released reasoning model and research papers have been genuinely impressive. In an OpenAI paper, Kimi k1.5 and DeepSeek-R1 were both identified as Chinese models that had uncovered the secrets of o1. Their recent paper, like DeepSeek's, also focused on long-context algorithm optimization. But these achievements have been drowned out by DeepSeek's overwhelming momentum.

In one AI investor's view, DeepSeek represents a complete demystification of large language models, and its impact on LLM valuations at home and abroad far exceeds its impact on NVIDIA. And as the most high-profile company among the "AI Six Little Tigers," Kimi has hardly been spared.

In the eyes of some investors, as the lawsuit has progressed to this point, financial considerations may no longer be the top priority for either side. "One side may believe that clarifying industry rules matters more, while for the other, the final legal outcome is ultimately easier to accept than a media spectacle."

All of this means that the story of Moonshot AI — one of gain and loss from the very beginning — is far from over.

Image source: Unsplash