The CEO of Chinese tech company Xunlei said Monday there was no basis for the multiple class action lawsuits his company received from investors.
That followed an announcement from the firm last year that it would use blockchain technology and cryptocurrency for its cloud computing services. The lawsuits allege that Xunlei — which is publicly listed in New York — knowingly participated in unlawful initial coin offerings (ICOs), and made false statements about the legitimacy of those activities that had an impact on the stock price, according to a report from CoinDesk.
The company sells a device called OneThing Cloud that lets users share idle computing resources such as bandwidth and storage in exchange for a digital token called LinkToken. Those digital assets can be redeemed for other services from the company, it says.
Xunlei uses the spare bandwidth and storage to create enterprise-level cloud computing services that are sold to other firms. The company claims its model means cloud services at a relatively lower cost.
The Chinese tech company announced its cryptocurrency project last October after Beijing banned firms from raising new funds by issuing virtual coins.
Xunlei CEO Lei Chen told CNBC’s Akiko Fujita and Martin Soong that his company did not break any rules with the cryptocurrency project.
“We didn’t make a public offering of a coin,” Chen said at the annual Boao Forum for Asia on Tuesday. “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.”
He explained that the digital token would allow transparent bookkeeping for the computing resources that users share on the company’s cloud platform.
“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,” Chen said.
“So the definition of ICO has to be interpreted in the Chinese market,” he added.
Xunlei’s board also said in an open letter last year that it would require the real identities of participants in its cryptocurrency project and measures would be taken to stop illegal transactions, according to local media reports.
But plaintiffs in the lawsuits allege that the tokens are like an ICO because the company requires users to first buy the hardware before they can receive the tokens, according to the CoinDesk report.
Still, Xunlei’s stock price has suffered: Shares fell nearly 21 percent in March.
