On April 12, 2018, Pomerantz LLP was appointed Lead Counsel in a class action lawsuit against Xunlei Limited (“Xunlei” or the “Company”) (XNET) and certain of its officers. The class action, filed in United States District Court, for the Southern District of New York, and docketed under 18-cv-00646, is on behalf of a class consisting of investors who purchased or otherwise acquired Xunlei securities, seeking to recover compensable damages caused by defendants’ violations of the Securities Exchange Act of 1934.
Xunlei is a cloud-based acceleration technology company operating an internet platform in China based on cloud technology to enable users to access, manage, and consume digital media content. The Company’s main product is OneCloud, a network linked storage device allowing multiple users to share online storage remotely and a “mining machine” for users to share their idle bandwidth with Xunlei’s content delivery networks.
On October 10, 2017, Xunlei issued a press release announcing the introduction of “OneCoin”, a blockchain-based product with no central bank endorsed value. OneCoin was subsequently renamed “Lianke”.
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements regarding the Company’s business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Xunlei had engaged in an unlawful financial activity; (ii) OneCoin was a form of disguised initial coin offering (“ICO”); (iii) Xunlei was engaged in the promotion of an Initial Miner Offering (“IMO”); and (iv) as a result of the foregoing, Defendants’ statements about Xunlei’s business, operations, and prospects, were false and misleading and/or lacked a reasonable basis.
On or about November 24, 2017, various news outlets in China reported that Xunlei’s business partner Shenzhen Xunlei Big Data Information Services Company Ltd. (“Big Data”) was accusing Xunlei of conducting an unlawful ICO through the Company’s OneCoin project.
On this news and over the course of two trading days, the Company’s ADS price declined $6.33 from a close on November 24, 2017, at $24.91 per ADS, to a close at $18.58 per ADS on November 28, 2017, a drop of approximately 25.41%.
On November 29, 2017, Xunlei issued a press release entitled “Xunlei Provides Clarification on Recent Market Development,” announcing an update on its business relationship with Big Data. The press release stated, in part, that Xunlei has requested Big Data to stop using the “Xunlei” brand name immediately and also terminated its right to use the “Xunlei” brand.
On this news, the Company’s ADS price declined $5.78 from a close on November 28, 2017, at $18.58 per ADS, to a close at $12.80 per ADS on November 29, 2017, a drop of approximately 31.1%.
On January 12, 2018, the National Internet Finance Association of China issued a “Risk Alert” notice regarding “Disguised ICO [Initial Coin Offering] Activities” (the “Risk Alert Notice”). The Risk Alert Notice referenced a September 2017 notice issued jointly by seven government ministries, which stated, in part, that “ICO activities are suspected of involving illegal criminal activities including illegal fund-raising, illegal issuance of securities, and illegal sale of notes and bonds” and “all institutions and individuals should immediately stop engaging in ICO activities.” The Risk Alert Notice further stated that “[i]n the case of Lianke issued by Xunlei . . . the issuing company in effect substitutes Lianke for the duty to pay back project contributors with legal tender, making it essentially a financing activity and a form of disguised ICO.”
On this news, the Company’s ADS price declined $6.27 from a close on January 11, 2018, at $22.90 per ADS, to a close at $16.63 per ADS on January 12, 2018, a drop of approximately 27.38%.