Item 1. Legal Proceedings
Item 1. Legal Proceedings
Legal case with FT Global Litigation
In January 2021, FT Global Capital, Inc. (“FT
Global”), a former placement agent of the Company filed a lawsuit against the Company in the Superior Court of Fulton County, Georgia.
FT Global served the complaint upon the Company in January 2021. In the complaint, FT Global alleges claims, most of which attempt to
hold the Company liable under legal theories that relate back to an alleged breach of an exclusive placement agent agreement between FT
Global and the Company in July 2020 which had a term of three months. FT Global claims that the Company failed to compensate FT Global
for securities purchase transactions between December 2020 and April 2021, pursuant to the terms of the expired exclusive placement agent
agreement. Allegedly, the exclusive placement agent agreement required the Company to pay FT Global for capital received during the term
of the agreement and for the 12-month period following the termination of the agreement involving any investors that FT Global introduced
and/or wall-crossed to the Company. However, the Company believes the securities purchase transactions at issue did not involve the one
investor which FT Global introduced or wall-crossed to the Company during the term of the agreement. FT Global claims approximately $7,000,000
in damages and attorneys’ fees.
The Company timely removed the case to the United
States District Court for the Northern District of Georgia (the (“Court”) on February 9, 2021 based on diversity of jurisdiction.
On March 9, 2021, the Company filed a motion to dismiss based on FT Global’s failure to state a claim which is pending before the
Court. On November 10, 2021, the Court entered an Order granting the Company’s motion to dismiss FT Global’s fraud claim and
breach of contract claim as to the disclosure of its confidential and proprietary information. The Court denied the Company’s motion
to dismiss FT Global’s i) breach of contract claim for failure to pay FT Global pursuant to the terms of the exclusive placement
agent agreement; ii) claim for breach of the covenant of good faith and fair dealing; and iii) claim for attorney’s fees, and the
court concluded that additional information can be obtained through discovery. The trial began on April 8, 2024 and ended on April 11,
2024, on which date the jury returned a verdict in favor of FT Global. On April 11, 2024, the Court entered a judgment awarding FT Global
$8,875,265.31 and on April 16, 2024, the Court issued an amended judgment, awarding FT Global $10,598,379.93, which includes $7,895,265.31
in damages, $1,723,114.62 in prejudgment interest, and $980,000.00 in attorney’s fees. On May 9, 2024, the Company filed a post-trial
motion to set aside the jury verdict and for a new trial and the Court denied the motion on March 3, 2025. The Company filed notice of
appeal to appeal the judgement to the United States Court of Appeals for the Eleventh Circuit on April 2, 2025. The Company will seek
to have the judgment overturned on appeal. The Company’s opening brief in the appeal is due on June 11, 2025.
FT Global has registered the Court’s judgment
in the United States District Court for Southern District of New York (“NY Court”), where FT Global has brought a motion
requiring the Company to turn over its stock in its subsidiary companies. On August 28, 2024, NY Court granted FT Global’s
motion for turnover of Defendant’s shares in Defendant’s wholly-owned subsidiaries as Defendant 1) failed to satisfy the
$10.8 million judgment rendered in the Northern District of Georgia and registered in the Southern District of New York, and 2) is in
possession of money and property in which it has an interest. The NY Court ordered Defendant shall turn over the shares, membership,
or limited partnership interests in all of its subsidiaries, and the corporate seals of its China and Hong Kong-based subsidiaries, to
the U.S. Marshal for auction or sale until the judgment is satisfied. Pursuant to the order issued by the United States District Court
for the Southern District of New York on August 28, 2024, the United States Marshal for the Southern District of New York (“U.S.
Marshal”) sold the securities of the subsidiaries of the Company other than those in Hong Kong and China in auction of: (i) all
of the membership interests in Future Fintech Digital Capital Management LLC; (ii) all of the outstanding shares of FTFT UK Limited;
(iii) the corporate seal of DigiPay FinTech Limited; (iv) the corporate seal of GlobalKey SharedMall Limited; (iv) all of the outstanding
shares of Future Fintech Labs Inc.; and (v) all of the outstanding shares of Future Fintech Digital Number One GP, LLC (USA) to Alec
Orudjiev, the general counsel of FT Global for $25,000 on December 18, 2024. On December 6, 2024, the Company agreed to sell all issued
and outstanding shares of FTFT SuperComputing Inc. a wholly owned subsidiary of the Company (“FTFT SuperComputing”) to DDMM
Capital LLC (the “Buyer”) for a purchase price that equals to: (i) the assumption of the obligations of FTFT SuperComputing
totaling $973,072.24 and (ii)$1,000,000, which was paid to an account at Olshan Frome Wolosky LLP to satisfy, in part, the right of payment
held by FT Global Capital, Inc. arising from the judgment entered in favor of FT Global and against the Company registered in the Southern
District of New York and all matters pertaining to such litigation. The Company has appealed the turnover order of the NY Court for the
auction of securities of the subsidiaries of the Company in Hong Kong and China to the United States Court of Appeals for the Second
Circuit and is waiting for the final decision of the Court of Appeals. On February 6, 2025, FT Global filed a motion (“Motion”)
in the NY Court, amended on February 12, 2025, seeking a turnover order for 39,825,939 (before 1 for 10 reverse stock split effected
by the Company on April 1, 2025) unissued shares of the Company’s common stock for sale to satisfy the judgement. On April
30, 2025, the Company received order from the NY Court to turn over its unissued shares to U.S. Marshal for auction. The transfer agent
of the Company has issued 1,951,443 shares of common stock in the name of the United States Marshals Service. The Company will continue
to vigorously defend the action against FT Global and has filed notice of appeal to appeal the order of the NY Court to the United States
Court of Appeals for the Second Circuit.
Shareholders Lawsuit
(LaBelle and Janzen)
The LaBelle case is a
putative securities class action filed in January 2024 and is pending in the District of New Jersey. Denise LaBelle (“Plaintiff”)
alleges that the Company and certain of its officers violated Sections 10(b) and 20(a) of the Securities Exchange Act by making materially
false or misleading statements in the company’s public filings and disclosures relating to the former Chief Executive Officer of
the Company Mr. Shanchun Huang and charges filed by the SEC against Mr. Shanchun Huang with manipulative trading in the stock of the Company
using an offshore account shortly before he became the Company’s CEO in 2020 and failing to disclose his beneficial ownership.
Mr. Huang has denied the allegations of trading before he became CEO. Plaintiff claims that these alleged misstatements caused the
Company’s stock to trade at artificially inflated prices, harming investors when the truth was revealed. The lead plaintiff
and lead counsel were appointed in September 2024. The Company was served in September 2024, and the Plaintiff is currently seeking
substituted service on the individual defendants. Once service is resolved, the Plaintiff is expected to file an amended complaint,
which the Company and other defendants intend to move to dismiss.
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The Janzen action is a consolidated
shareholder derivative case filed by Jeff Janzen on May 31, 2024, also pending in the District of New Jersey, brought nominally on
behalf of Future FinTech. Plaintiff alleges that certain current and former officers and directors breached fiduciary duties by
allowing or failing to prevent the same alleged misconduct at issue in LaBelle, including mismanagement and misleading public
disclosures. The derivative case has been stayed by stipulation, pending resolution of the anticipated motion to dismiss in LaBelle,
but plaintiff has reserved the right to participate in mediation and settlement discussions relating to the class action.
Item 1A. Risk Factors
Not applicable.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.