Scandal-hit ChinaCast Education Corp. (NASDAQ:CAST), a post-secondary education and e-learning services provider, announced earlier this week that it is continuing to pursue the return of the company seals, business licenses and financial seals (referred to as “chops”) for its two Chinese subsidiaries.

Almost at the same time, the company disclosed in the 8-k form that an investigation on whether questionable activities involving current and former employees are in progress, saying it will pursue relevant civil and criminal legal remedies if necessary.

In March, Ron Chan, the CEO of ChinaCast was ousted in a battle for shareholder control. An American investor succeeded not only in replacing Chan, but also in obtaining control of the ChinaCast board. In normal circumstances, it is obvious that Chan can no longer exert influence on the company in any shape or form.

But only one month later on, April 19, the new executive team found all company seals and authorized signatures for its Chinese subsidiaries were missing. Under Chinese law, the chops are necessary to enter into new contracts, conduct banking business and take official corporate action.

Chan is believed to have taken possession of the items but is claiming no knowledge of the matter.

One reason that ChinaCast is having a problem is that U.S. investors did not actually buy an interest in its operations. Instead, to avoid Chinese restrictions on foreign investment, ChinaCast’s shareholders invested in a U.S. company that has contractual arrangements with a Chinese company.

The problem with this structure, known as VIE (variable interest entity), is that it may be illegal under Chinese law and has been criticized by Chinese regulators. Even if it is legal, if the Chinese owners decide to go rogue, the U.S.-listed entity must sue and obtain a judgment from a Chinese court to enforce these dubious contracts.