Tech firm Xunlei comes under fire over ‘disguised’ ICO
Beleaguered technology company Xunlei has become the subject of several class action lawsuits from investors who have bought the company’s digital token, LinkToken.
As with all too many initial coin offerings (ICOs), Xunlei is accused of misleading its investors who have chosen to invest in the company’s much trumpeted digital coin. However, the NASDAQ-listed firm is fighting with some vigour.
At the Boao Forum for Asia last week, Xunlei CEO Chen Lei refuted the allegations that the company intentionally misled investors so that it could carry out an ICO in China. Xunlei offers a device called OneThing Cloud, which allows users to share their idle internet bandwidth and storage in exchange for LinkToken, according to a South China Morning Post report. However, Lei insisted that the company did not intend to issue any funds through the token and it was not a public offering.
“By making a public offering, really you need to use it to raise money. We have never used a coin to raise any money at all, that’s never our intention,” Lei said, according to the news outlet.
Xunlei launched LinkToken in October 2017 along with several other initiatives, in hopes of entering the blockchain market. Interestingly, the company’s stock price boomed substantially after the launch with real bullish action but it has now more than halved from a record high of $25 in November, when it soared by no less than 500%.
However since that bright period, the shares of Xunlei have sunk to a low of $10 in early April, with several U.S.-based investors seeking class action against the company for allegedly misleading them regarding the company’s activities between October 2017 and January 2018. The investigators claimed Xunlei required them to purchase hardware from the company to share internet bandwidth.
In response, Lei hinted that he would be hiring legal assistance to fight the claims, noting that he fully supports any regulatory action against ICOs.
“We are a small capital company, so our stock price does fluctuate, but I don’t think there’s any basis for the lawsuit because we’re operating in China and it is the Chinese law and regulations that we need to observe,” he said, adding that “the definition of [an] ICO has to be interpreted in the Chinese market.”
In January, China’s National Internet Finance Association (NIFA) concluded its investigation into LinkToken with a finding that Xunlei had attempted to evade regulations by conducting an “initial miner offering.”