Gu Mo is an ancient Chinese bone-stealing demon.
Eons ago, Gu Mo twisted the power of the pair of jewels known as the Eyes of the Dragon (or Dragon's Eyes) in his bid to control the 15 Flaming Circles and become invincible. The Eyes were used against him and he was imprisoned in a golden dragon statue with the Eyes of the Dragon serving as keys to lock him in. As time passed, Gu Mo was used as a fairy tale to scare children into submission much like the Boogieman in western culture.
In the present day, in New York's Chinatown, a Chinese merchant and his daughter find out that they are out of money and that if they don't continue paying off a gang that is threatening them, they'll be in big trouble. When his daughter suggests calling the police, the merchant refuses. When she offers to instead pay them off with the golden dragon statue (which somehow got into their possession), the merchant still refuses. Eventually, the gang vandalizes the merchant's store and the merchant's daughter removes the Eyes of the Dragon from the statue. This causes Gu Mo to be freed from his prison and he then possesses the merchant, assumes the form of a green humanoid demon in old-fashioned Chinese clothing, and steals the bones of the gang. He forms the bones into monstrous minions and uses them to look for the two emeralds.