Xunlei Faces Legal Battle Over Former CEO’s Alleged Fund Diversion

Xunlei US98419E1082

A Shenzhen court has formally accepted a civil lawsuit filed by Xunlei against its former chief executive, Chen Lei. The case, registered on January 15, 2026, alleges the misappropriation of corporate funds between 2017 and 2020. The company has now revived its legal efforts to recover assets. Market reaction to the news has been muted, with the stock showing only limited price movement in recent sessions.

The litigation centers on accusations that Chen Lei authorized payments totaling approximately 170 million yuan to a shadow entity under his control, Shenzhen Xingronghe, despite the absence of any legitimate business dealings between the companies. Xunlei’s filing further cites fabricated contracts and the alleged diversion of funds into illicit cryptocurrency trading. Former Senior Vice-President Dong Xue is also named in the proceedings.

This civil action follows earlier criminal investigations into the matter, which were provisionally suspended in late 2022. Reports indicate that the pause in the criminal probe was partly due to Chen Lei’s residence outside of China. Media sources suggest several former executives departed the country following Chen Lei's dismissal in April 2020.

Historical Context and Company Strategy

The allegations are largely tied to a previous era of leadership and the company's earlier strategic direction. Xunlei references its 2017 blockchain initiative, known as Wanke Cloud, which initially spurred significant stock volatility before ultimately collapsing under regulatory scrutiny and internal pressures. The current lawsuit pertains mostly to activities conducted under that former management structure.

Market Performance and Analyst Perspective

Trading activity for Xunlei shares has remained subdued. The stock closed at $7.25 on Thursday, January 22, marking a decline of roughly 3.1% from its previous close of $7.48 on January 21. Official closing data for January 23 was still being processed at the time of reporting.

Analyst coverage on the stock is sparse. Over the preceding 90 days, only one major institution issued a buy recommendation. While some technical analyses have pointed to negative signals, these indicators are inconsistent and fail to present a clear overall market outlook.

Path Forward and Financial Implications

Xunlei has affirmed its commitment to pursuing civil legal channels to seek financial restitution. The company’s next quarterly results are anticipated around mid-March, with an estimated publication date of Thursday, March 12. Both the upcoming earnings report and developments in the civil case are expected to provide critical insight into the potential scale of recoverable assets and the lasting financial impact on the company.