It appears Kenshi was indeed spying on the Red Dragon for the Special Forces, trying to learn the location of Daegon. When his cover was blown, he was forced to go into hiding and was eventually able to contact Sonya; she tells him that the Red Dragon had found out he had a son named Takeda, which is also news to Kenshi. He's the product of a fling Kenshi had with a badass woman named Suchin years ago, and the Red Dragon has targeted the both of them. Kenshi heads to their home in Thailand as fast as he can, only to find that Suchin died protecting Takeda. So Kenshi then went on the run with Takeda in tow, which leads us to the beginning of the story as Hsu Hao and his forces are chasing them.
Hsu Hao and his men beat Kenshi to a pulp while another guy who was scarred by Kenshi gets ahold of Takeda, only to be killed by Scorpion. Just as Hsu Hao's about to finish Kenshi, Scorpion also ends him in an awesome scene. It turns out Kenshi had come to the home of the new Shirai Ryu, which Scorpion built from those without anywhere else to go after the "Netherrealm War." It sounds like Kenshi helped Scorpion battle his inner demons at some point in the past, and Scorpion was inspired to help others do the same. Kenshi leaves in the middle of the night while Takeda is sleeping, telling Scorpion that he still needs to find and finish Daegon. Takeda also tries to leave the next morning, but Scorpion stops him and makes it clear that he intends to train him as one of the Shirai Ryu.
At a Red Dragon temple in China, Sub-Zero is launching a solo assault on the base, searching for one of the Kamidogu for "Lord Raiden." After finishing off the last Red Dragons there and entering the chamber where the Kamidogu is supposedly held (along it being revealed that this Sub-Zero did work for Quan Chi at some point), he finds it gone. Just then, a laser blast knocks his mask off, and he finds the Kamidogu--a dagger--pushed right up to his face as it begins sending some red stuff into him: Kano got the Kamidogu first!