"We're proceeding down the line to check on every other major source of business for the company," Kwon told CNBC, noting he was in Beijing to conduct a three-week-long due-diligence expedition to examine all of Muddy Waters' allegations. "We're into week one and so far we have not found anything they've gotten right," he said, noting his company has spoken with some of China's largest handset makers, NQ's payment providers and carriers China Mobile and China Unicom, as well as NQ consumers.  "With regards to the Muddy Waters allegations, the first thing is we have to keep the source in mind," Kwon said. "It's not a benevolent organization out there to do social good. It's out there to take short positions and make money for their clients."  (Read more: After controversial 'sell case'American Tower goes'Mad')  He added that NQ had been vetted by auditors, investors and investment banks recently.  Block told CNBC that his team has established its "bona fides" in finding fraud in China, noting his company's previous short-selling successes, such as Sino-Forest, and saying that of the first five companies Muddy Waters accused of fraud, four have been delisted.  "We have people who are former auditors on our team. We have people who are software and tech entrepreneurs on our team. We have the traditional finance guys who you know sit and crank spreadsheets. We have people like myself who are ex-lawyers," he said.  Toro Investment Partners' Kwon said: "If you look at their [Muddy Waters'] track record recently, they've gotten the past seven calls wrong."  (Read more: We Listen to Our Fiercest Critics:Olam CEO)  NQ meanwhile has challenged Muddy Waters' sources, saying that the firm does not disclose who its researchers are and what documents they examine.  "I will absolutely not give out their names," Block said. "We've had people picked off in China in the past by the Ministry of State Security. Some of our people have been messed with very hard by the MSS."  — By CNBC's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1
Carson Block, foundeder of Muddy Waters, challenged his latest target, Chinese mobile security software company NQ Mobile, to sue him in the U.S.