Investors Sue Another Crypto-Related Firm for ‘Disguising its ICO’
Xunlei, a China-based multinational firm has been dragged to Court by investors who feel they were deceived by the firm to invest in its ICO project in 2017.
Initial Coin Offering or Puff of Smoke?
The CEO of Xunlei, Chen Lei has strongly refuted accusations leveled against his firm claiming that they misled investors in a bid to organize a legal ICO project in China. According to the South China Morning Post, Xunlei operates a cloud-based platform for sharing digital content.
While most ICO projects require contributors to donate fiat or established cryptocurrencies like bitcoin and ether in exchange for their tokens, participants in the Xunlei ICO are only obligated to share their idle internet bandwidth with the project and get rewarded with “Linktoken.”
The CEO firmly believes that the distribution of Xunlei’s Linktoken is not an ICO as the company did not raise any funds through the issuance of the token and investors cannot trade Linktoken for profit. Lei declared:
“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.”
The Crypto Bug and Lawsuit
Xunlei latched onto the blockchain bandwagon back in 2017, by launching the above mentioned digital asset. In the spirit of crypto, the distribution of Linktoken boosted the company’s stocks by nearly 500 percent in November.
Notably, the firm has experienced a sharp decline in its share price, crashing to a meager $10 in early April 2018.
Investors who purchased the company’s shares when it was red hot from October 2017 to January 2018 have accused Xunlei of issuing its token through a “disguised ICO.” Also, they alleged that the China-based tech firm made false and misleading statements about the business.
Investors claimed that they compulsorily purchased hardware from Xunlei to share their bandwidth and claim the Linktoken. However, Lei has denied all the allegations saying that:
“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. The definition of an ICO has to be interpreted in the Chinese market.”
The founders of Xunlei have hinted that they are on the verge of hiring lawyers to defend the firm.
“ICOs are terrible, and a bad name to blockchain technology. Governments should clamp down on these practices – a crackdown is the only way blockchain can rebuild its reputation,” Lei declared, criticizing initial coin offerings by calling for more stringent laws to crush the budding industry.
Mr. Lei also reiterated that: “We have been very straight on our business practices – we do not sell tokens.”
China now frowns on all thing cryptos and ICOs. In 2017, the nation banned all forms of initial coin offerings and virtual currencies, including bitcoin.