Xunlei is being accused of disorienting investors in order to hide an initial coin offering (ICO) through which Linktoken was distributed. Chen Lei (the chief executive officer of Xunlei) has denied the indictments that the company misled investors in order to illegally state an ICO in China.
Chen Lei has declared that the Linktoken distribution did not comprise an ICO as the company was not raising any funds through the issuance of the tokens, and due to Linktoken containing a utility token that is not let to be traded.
In October 2017, Linktoken was started in conjunction with other attempts by Xunlei to reach the blockchain industry. Whilst the distribution of the Linktoken appears to have been the catalyst for many weeks of bullish action, the value of Xunlei’s stock has more than halved since posting 500% gains and setting record highs of $25 USD in November 2017.
By early April the price of Xunlei’s shares had collapsed to approximately $10, causing some U.S.-based investors to seek action against the company for allegations of giving false and/or misleading statements demanding the legitimacy of the company’s cryptocurrency measures between October 2017 and January 2018.
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. 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. We have been very straight on our business practices – we do not sell tokens.
Chen Lei, chief executive officer, Xunlei
China’s National Internet Finance Association (NIFA) conducted an investigation into Xunlei’s token distribution, concluding in January the company had dodged regulations through conducting an “initial miner offering.”
Xunlei’s shares (XNET) are at present trading at $13.46, after retracing from highs of $14 on the 20th of April.