On January 15, 2026, Xunlei Limited (Nasdaq: XNET) filed a civil lawsuit in a Shenzhen court, targeting former CEO Chen Lei and his core team, with a claim amounting to 200 million RMB. According to public information, the core of this lawsuit points to allegations of siphoning off funds from the listed company through false contracts, with several tens of millions of RMB being invested in cryptocurrency trading, which has been explicitly prohibited by regulatory authorities, thus violating both corporate governance and financial regulation red lines. This case brings the governance failures of Chinese concept stocks and China's stringent regulation of cryptocurrency trading directly to the forefront, making "how management utilizes company funds and whether they circumvent to engage in high-risk cryptocurrency speculation" a question that investors and regulators must confront. This article will further elaborate on the lawsuit: the practical difficulties of cross-border accountability, the systemic concerns of governance risks in Chinese concept stocks, and the ambiguous boundaries between enterprises and the cryptocurrency world under high regulatory pressure.
From Embezzlement to 200 Million Recovery: Six Years of Public Fracture
If the 200 million RMB recovery in 2026 is seen as the climax of a public judicial battle, then the foreshadowing of this conflict can be traced back to 2020 at the latest. That year, Xunlei issued an announcement accusing then-management Chen Lei of embezzlement and reported the matter to the public security authorities, indicating that the company had escalated internal conflicts to a criminal level six years ago. However, at that time, the external view was more focused on disputes over control and operational direction within the company, with specific details regarding fund allocation and cryptocurrency investments not fully exposed. Now, Xunlei has chosen to initiate a high-stakes civil lawsuit in the Shenzhen court, explicitly stating the claim amount as 200 million RMB, which is tantamount to launching a face-to-face economic interest settlement based on the earlier criminal report, serving as both a continuation of the 2020 accusations and a legal escalation akin to "demanding payment." Multiple media outlets have cited the company's statement that this is a "legal upgrade action six years after the 2020 announcement," pushing the previously more procedural disputes into the visible realm of civil trials.
As for why a similar high-stakes recovery was not initiated years earlier, but rather now, clues can only be found in the external environment and the internal rhythm of the company. In recent years, China has tightened regulations on cryptocurrency-related activities, prohibiting financial institutions and payment agencies from providing related services, and categorizing cryptocurrency trading and token financing as "explicitly prohibited." The clear regulatory stance has continuously lowered the tolerance for cryptocurrency risks at the corporate level. For Chinese concept stocks listed in the U.S., overseas regulatory bodies have also strengthened requirements for corporate governance and internal controls, with investors becoming increasingly sensitive to moral hazards among executives and the safety of funds. Against this backdrop, Xunlei's choice to transform years of internal conflict into a high-stakes civil recovery is not only a settlement of historical issues but also a signal to the outside world of "cutting risks and reshaping governance" under the new regulatory and capital market context.
False Contracts and Company Funds: Allegations of Circumventing High-Risk Speculation
The most controversial accusation surrounding this case is the claim of "siphoning off company funds through false contracts." According to multiple sources, this operation is roughly described as: signing contracts with related parties or specific third parties that lack real business support, transferring funds from the listed company under the guise of normal operations or cooperation, and then altering the use of funds internally or through hidden channels. This practice is one of the most serious violations within the corporate governance framework, as it directly bypasses normal budgeting, approval, and risk assessment processes, making it difficult for the supervisory board, board of directors, and external auditors to timely identify the true destination of funds, while also leaving room for subsequent investments in high-risk areas. Public reports commonly mention the misappropriation scale as "tens of millions," but this figure is currently only a consensus expression based on public materials from multiple media outlets, with no detailed judicial audit results disclosed, and the specific amount and composition still awaiting further clarification through court proceedings.
More sensitive is the suspected flow of funds. Multiple channels have cited wording indicating that the siphoned funds were used for "explicitly prohibited cryptocurrency trading." In the context of Chinese regulation, this expression does not refer to individual speculative behavior but rather to the strict prohibition of financial institutions and various corporate organizations from directly or indirectly providing cryptocurrency trading services or participating in token issuance and trading since 2017, especially as recent regulatory documents have repeatedly reaffirmed this. For individuals, whether and how to invest in overseas cryptocurrency assets exists in a certain gray area in practice, but for listed company funds, this red line is much clearer: enterprises must not place shareholder and public capital in areas with extremely high policy risks, which have already been clearly defined by authorities. Once it is determined that listed company funds have circumvented regulations to participate in cryptocurrency speculation, it could not only trigger administrative regulatory and judicial risks but also directly erode the interests of minority shareholders, making them passive bearers of high-volatility, policy-sensitive assets without their knowledge, while also causing profound damage to the company's reputation in the capital market.
Individuals Abroad, Cases Domestic: The Reality Gap of Cross-Border Accountability
One complicating factor in this lawsuit is the fact that the accused former CEO Chen Lei has been abroad since April 2020. Public information shows that he left China around the time of his departure and the publicization of the conflict, and has remained abroad for an extended period, making it inevitable that subsequent criminal reports or the current civil lawsuit must confront a practical premise: the individual is not within the jurisdiction, yet the case can only proceed domestically. From the start of the delivery process, civil lawsuits against defendants residing abroad require formal notification through judicial assistance and foreign delivery, which often takes a long time between different legal jurisdictions and may even encounter issues with the cooperation of the country where the defendant resides. In terms of evidence collection, once key individuals and their potentially controlled entities or accounts are located abroad, domestic courts will face thresholds and efficiency limitations in cross-border judicial cooperation when retrieving transaction records and financial details.
Greater uncertainty concentrates on the execution phase. For many executives of Chinese concept stocks, their work locations, family lives, and major asset layouts are often abroad. Once a domestic court issues a favorable judgment for the plaintiff, how to implement that judgment in the location of the defendant's assets becomes a question mark hanging over investors and the company. Theoretically, there are civil and commercial judicial assistance arrangements between China and certain jurisdictions, which can apply for recognition and enforcement of Chinese court judgments under certain conditions, but in practice, different countries have varying standards for reviewing such requests, complexities in procedures, and political and economic considerations. If this case enters the substantive judgment phase, it may need to rely on these cross-border cooperation paths to seek to lock down and dispose of relevant assets abroad. However, there has yet to be any authoritative channel disclosing whether Xunlei has planned subsequent cross-border execution arrangements, and the outside world can only continue to observe whether court documents, company announcements, and potential foreign procedures emerge during the case's progression.
Governance Alarm for Chinese Concept Stocks: Amplified Internal Control Cracks
From a broader perspective, the lawsuit between Xunlei and its former CEO has evolved from an internal dispute of a single company into a mirror reflecting the governance risks of Chinese concept stocks. An obvious question is that if the accusations are true, it means that for a considerable period, power within the company has been highly concentrated in the hands of a few core management members, allowing them to promote or condone the transfer of funds out of the company's normal operational track through false contracts. This power structure is not uncommon during periods of rapid corporate expansion, but once effective checks and balances are lacking, it provides fertile ground for embezzlement, benefit transfer, and even speculation in areas under high policy pressure. On the surface, it appears to be "a problem with a certain executive," but in essence, it exposes deeper governance flaws such as weak board oversight, the virtualization of independent directors' roles, and excessive concentration of ownership structure.
More specifically, if financial approvals and contract management operate according to the system, false contracts would be difficult to pass repeatedly over the years. Each large contract should be accompanied by explanations of business background, market feasibility studies, and multi-level approval processes, and should undergo cross-examination by internal and external audits. If these steps are simplified, bypassed, or reduced to mere formalism in actual execution, then "siphoning" behavior could be packaged as normal business on the financial statements, thus lurking for a long time. Compared to the rigid requirements for internal controls and significant fund usage in mature overseas markets, some Chinese concept stocks still exhibit significant gaps in institutional construction and cultural practice, resulting in greater violation space and higher discovery costs. For investors, this case serves as a wake-up call: when evaluating Chinese concept stocks, one should not only look at financial statements and growth stories but also pay attention to whether audit opinions are qualified or contain emphasis of matter, whether there are significant deficiencies in internal control evaluations, and whether the company has a history of governance disputes. These "footnote" type of information often reflect the company's health status at the institutional level.
The Red Line of Cryptocurrency Speculation Under High Regulatory Pressure: How Enterprises Self-Restrict Their Funds
Placing the Xunlei case within a larger regulatory context reveals a relatively clear policy trajectory. Since 2017, Chinese regulatory authorities have gradually classified and cleaned up activities related to token financing and cryptocurrency trading platforms; in the following years, multiple documents have repeatedly emphasized that financial institutions and payment agencies must not provide services for such transactions, and any form of cryptocurrency-related business is strictly prohibited. In recent years, "explicitly prohibited" has not only constrained institutional business but has also extended to a negative attitude towards enterprises and public institutions using funds to participate in such transactions in enforcement and judicial practice. If this case indeed connects listed company funds with prohibited cryptocurrency trading, its symbolic significance far exceeds that of an individual case: it directly places the issue of corporate funds engaging in cryptocurrency speculation under the spotlight of regulation and justice.
In terms of regulatory standards, there has long been a gray area between individual funds engaging in cryptocurrency speculation and corporate funds getting involved. Individuals participating in trading through overseas platforms often rely more on the principle of self-risk in the reality of limited enforcement resources, but once it rises to the corporate level, the issue is no longer just about profit and loss, but about the fiduciary duty to public shareholder capital and the degree of compliance with regulatory rules. The signals released by similar cases are clear: regulatory and judicial institutions are more likely to prioritize monitoring the paths through which corporate funds "circumvent" into the cryptocurrency market, including indirect participation through false contracts, related transactions, or overseas subsidiaries. For Chinese technology companies holding substantial overseas assets and businesses, this means that compliance considerations must be prioritized in fund utilization and incentive design, avoiding direct binding of equity incentives or bonus arrangements with high-risk cryptocurrency assets, and being cautious about any seemingly "innovative" investment structures to prevent being deemed as evading regulation or indirectly participating in prohibited transactions in the future.
An Ongoing Game: The Chain Reactions Beyond the Judgment
From the currently available public information, the case of Xunlei suing former CEO Chen Lei reveals a confluence of three intertwined risks: first, the loss of control in corporate governance, allowing executives to hold actual control over large sums of money for a considerable time; second, the collision with the red line of cryptocurrency regulation, with listed company funds allegedly flowing into "explicitly prohibited" trading areas, layering policy and compliance risks on top of market volatility; third, the uncertainty of cross-border execution brought about by the defendant's long-term residence abroad, leaving even a victorious plaintiff facing the practical dilemma of how to "recover the money." At the same time, caution must be exercised: the specific judicial audit results regarding the amount of misappropriation have not yet been made public, and the specific flow and profit and loss of funds in the cryptocurrency market have no authoritative disclosure, leaving the outside world to conduct limited interpretations within the existing framework of accusations, with any inferences beyond the publicly available facts carrying the risk of misinformation.
Nevertheless, this ongoing case has already cast a long shadow over the capital market and regulatory expectations. For Xunlei itself, the progress and final outcome of the lawsuit will affect investors' judgments regarding its ability to rebuild internal controls and its long-term valuation; for the management of other Chinese concept stocks, this case has implicitly tightened behavioral boundaries, causing "using company funds for high-risk cryptocurrency speculation" to slide further from the gray area into a high-risk prohibited zone; for the cryptocurrency industry, it means that institutional participation, especially from listed companies, is likely to remain constrained under regulatory pressure, highlighting the scarcity of compliance pathways. Moving forward, key windows to observe in this game include: whether the subsequent rulings disclosed by the Shenzhen court can restore a more complete picture of the fund flows and responsibility allocation; whether relevant regulatory authorities will issue clearer signals regarding corporate cryptocurrency risks; and whether more cases of accountability similar to "listed company funds involved in cryptocurrency speculation" will emerge in the market, forming new enforcement examples. Regardless of the final judgment, this protracted dispute has already become an important touchstone at the intersection of corporate governance of Chinese concept stocks and cryptocurrency regulation.
Join our community to discuss and become stronger together!
Official Telegram community: https://t.me/aicoincn
AiCoin Chinese Twitter: https://x.com/AiCoinzh
OKX Welfare Group: https://aicoin.com/link/chat?cid=l61eM4owQ
Binance Welfare Group: https://aicoin.com/link/chat?cid=ynr7d1P6Z
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
