Xunlei faces Class-Action for Concealing ICO

Nasdaq-listed company Xunlei has turned the subject of multiple class-action lawsuits from investors who bought the firm’s digital token, Linktoken
23 April 2018   1938

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.

US Crypto Companies to Support TON in Case With SEC

The Blockchain Association said Telegram taken sufficient measures to ensure that the Gram token offer met SEC requirements
23 January 2020   118

The Blockchain Association, which combines companies such as Coinbase, Circle, 0x and Ripple, issued an expert opinion as part of the ongoing proceedings of the US Securities and Exchange Commission (SEC) with Telegram.

Previously, the Digital Commerce Chamber launched a similar initiative. The blockchain association, however, was more straightforward and stated that Telegram had taken sufficient measures to ensure that the Gram token offer met SEC requirements. According to members of the organization, the actions of the SEC can damage not only Telegram, but the market as a whole.

The Court should not block a long-planned, highly anticipated product launch by interfering with a contract between sophisticated private parties. Doing so would needlessly harm the investors that securities laws were designed to protect.


The Blockchain Association

The Blockchain Association notes that for many years it has not been possible for SEC to obtain clear and unambiguous guidance for conducting activities in the cryptocurrency space, while the claims of the regulator make the current situation even more ambiguous. 

The SEC’s lawsuit also raises novel questions regarding whether companies are forbidden from raising funds from sophisticated U.S. investors, under well-established regulatory provisions, to build blockchain networks.


The Blockchain Association

They cite examples of startups TurnKey Jet and Pocketful of Quarters, in respect of which the regulator recommended not to apply legal measures, adding that such litigations inevitably involve high costs and do not guarantee industry participants that they will not be prosecuted in the future.

Telegram discussed its plans with SEC staff for a year and a half, provided copious information and responded to limited feedback by adjusting the design of its transaction. Yet, at the end, the SEC has sued, and the SEC’s briefs thus far say nothing about the substance of those discussions. 


The Blockchain Association

In conclusion, the group asks the court to “reject the SEC’s arguments that the not-yet-in-existence Grams were securities at the time of the Purchase Agreements.”