Cloud Network Xunlei Hit By Class Actions Over ICO Activity

Amid its blockchain and cryptocurrency pivot, cloud-based content delivery network Xunlei has been hit by two class action suits alleging it distributed false information that materially affected its stock price.

According to the two latest filings with the New York Southern District court on Jan. 18 and Jan. 24, respectively, the lawsuits against Xunlei and its CEO Chen Lei, CFO Eric Zhou and Zhou’s predecessor Wu Tao, are being brought by investors who purchased Xunlei stock from Oct. 10, 2017 to Jan. 11, 2018.

The filings state that during that period, Xunlei announced its shift into exploring blockchain technology, and subsequently launched a blockchain-based token to facilitate its cloud services.

The plaintiffs allege that the company, while knowingly participating in unlawful initial coin offerings, also issued a series of false statements about the legitimacy of this activity, which led to a material impact on its stock price. As such, the plaintiffs are seeking remedy through legal action.

Xunlei, based in China and listed on the New York Stock Exchange, was one of the first publicly traded companies that saw its stock price rise then plunge amid a business pivot into blockchain technology in late 2017.

Yet, the latest legal cases perhaps also mark the first of their kind in which investors team up to bring charges over debatably questionable moves by public companies into blockchain and cryptocurrency.

Blockchain pivot

According to the court documents, the cases stemmed from the initial announcement on Oct. 10, 2017, when Xunlei said it would launch its own blockchain-based cryptocurrency dubbed OneCoin, also known as Wanke Coin, which was later renamed to Lianke, or LinkToken in English.

According to announcements at the time, Wanke Coin was issued as a reward for Xunlei’s OneCloud users who were willing to share their idle network bandwidth on its platform. In order to receive this reward, users need to purchase an item of hardware called OneThing Cloud from Xunlei to be able to share their cloud storage and network bandwidth.

The firm doubled down on its commitment to its blockchain pivot in an earnings release in November…

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