Item 3. Legal Proceedings
ITEM 3 - LEGAL PROCEEDINGS
Legal case with FT Global Capital, Inc.
In January 2021, FT
Global Capital, Inc., a former placement agent of the Company, filed a lawsuit against the Company in the Superior Court of Fulton County,
Georgia, and served the complaint that same month. The Company has previously reported developments related to this matter in its filings
with the Securities EC, including without limitation, its Annual Report on Form 10-K for the fiscal year ended December 31, 2021, Form
10-K for the fiscal year ended December 31, 2022, Form 10-K for the fiscal year ended December 31, 2023, Form 10-K for the fiscal year
ended December 31, 2024, Quarterly Report on Form 10-Q for the fiscal quarter ended on March 31, 2025.
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On June 17, 2025, the
Company entered into a Settlement and Forbearance Agreement with FT Global to resolve four federal court judgments totaling approximately
$4.0 million in cash. In addition, the Company agreed to issue 340,000 shares of its common stock to FT Global and 60,000 shares to its
legal counsel, and to issue rights entitling FT Global to receive up to 1.3 million additional shares of common stock, with 650,000 eligible
no earlier than six months after signing (Series A Right) and 650,000 eligible no earlier than twelve months after signing (Series B
Right). The Company has issued 400,000 shares of common stock in accordance with the foregoing. Under the agreement, FT Global agreed
to suspend enforcement actions in exchange for a structured cash settlement and the issuance of shares.
The Company’s
obligations include instalment payments over 18 months and the issuance of shares pursuant to a court order under Section 3(a)(10) of
the Securities Act. The agreement also includes mutual releases and requires the Company to remain current in its SEC filings and maintain
its listing on a national securities exchange. Additional details are included in the Company’s Current Report on Form 8-K filed
on June 20, 2025.
As of the date of this report, the Settlement and Forbearance Agreement remains in effect and the parties are
in compliance with the terms.
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. On July 28, 2025, the Plaintiff filed an amended complaint, which the Company and other
defendants intend to move to dismiss. On January 20, 2026, the Company and certain of its current and former officers and directors
filed a motion to dismiss the derivative complaint pursuant to Rules 12(b)(5) and 12(b)(6) of the Federal Rules of Civil Procedure in
the United States District Court for the District of New Jersey.
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.
Settlement with SEC
On December 17, 2019, the Company announced that
it received a subpoena from the SEC’s Division of Enforcement requiring the Company to produce documents and other information
and the Company has cooperated with the SEC’s investigation and information request. On July 3, 2023, the SEC announced a settlement
of the investigation with the Company. Without admitting or denying the SEC’s findings, the Company has consented to: (i) cease
and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and (3) of the Securities Act, Sections
13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-13 and 13a-15(a) thereunder; (ii) pay a civil money
penalty in the amount of $1,650,000 to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury,
subject to Exchange Act Section 21F(g)(3) and the payment shall be made in the following installments: the first installment of $150,000
shall be paid within ten (10) days of July 3, 2023 (the “Order Date”); the second installment of $375,000 shall be paid within
90 days of the Order Date; the third installment of $375,000 shall be paid within 180 days of the Order Date; the fourth installment
of $375,000 shall be made within 270 days of the Order Date; and the last installment of $375,000 shall be made within 360 days of the
Order Date; (iii) retain, within sixty (60) days of the Order Date, at Company’s own expense, a qualified independent consultant
(the “Consultant”) not unacceptable to the SEC staff, to test, assess, and review the Company’s internal accounting
controls and internal control over financial reporting (collectively, “review), and the Consultant, at the conclusion of the review,
which in no event shall be no more than 180 days after the Order Date, to submit a report of the Consultant to the Company and the SEC
staff and the report shall address the Consultant’s findings and shall include a description of the review performed, the conclusions
reached, and the Consultant’s recommendations for changes or improvements; and (iv) adopt, implement, and maintain all policies,
procedures and practices recommended in the report of the Consultant within 120 days of receiving the report from the Consultant. The
Company has made all installment payments of the penalties except for the last one which will due on 360 days of the Order Date. On July
26, 2023, the Company also has engaged an independent consultant to test, assess, and review the Company’s internal accounting
controls and internal control over financial reporting. The consultant has completed its test, assess and review and issued a final report
in December 2023. The Company has adopted and are implementing and maintaining policies, procedures and practices recommended in the
report of the Consultant.
ITEM 4 - MINE SAFETY DISCLOSURES
Not applicable.
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PART II