Xunlei Limited, a Nasdaq-listed cloud computing, and blockchain company from China found itself in the midst of a massive controversy regarding its former chief executive officer. In an announcement published on its official website, the company said that Chen Lei, its former CEO, was under police investigation for dereliction of duty and embezzlement.  

According to a report from Yicai Global, Chen is accused of transferring huge sums of money and copious amounts of “core technologies” from Xunlei to Xingronghe, the company’s bandwidth supplier. Sources have revealed that Chen himself was “in control” of Xingronghe, despite a lack of material evidence connecting him with the company. The same sources also told reporters that they suspect Chen recruited his close associates into key positions at Xunlei to help him fake transactions and fabricate contracts with Xingronghe. Specifically, sources revealed that Chen colluded with Dong Xue, the company’s former senior vice president, to recruit Dong’s close friends and place them into key positions at Xunlei. Police records have shown that he is accused of misappropriating tens of millions of yuan in the past year in illegal cryptocurrency speculation.

Aside from using the above-mentioned employees to siphon millions of yuan from the company, sources within Xunlei also told reporters that Chen had connections with another suspicious company—Xiangyun, but that they were unsure whether these dealings cost the company.

Chen was removed from his position as the CEO of Xunlei on Apr. 2 this year, but the company never disclosed the reasons behind the massive change in its senior management. Sources within the company described that the company was going through a tough period after his ousting, as Chen reportedly refused to hand over the company to Li Jinbo, the newly appointed CEO. But despite the company keeping quiet about the circumstances of Chen’s removal from his position, many suspected that it had something to do with the massive financial losses the company suffered in the first quarter of the year. 

In a financial report published by the company at the end of this year’s first financial quarter, Xunlei disclosed that it suffered a net loss of $11.53 million. Once Chen was removed from his position, however, the company managed to cut its losses and reported a net loss of just $5.5 million in the second quarter of the year. 

The company said that it was during an audit conducted by the new management team that Chen’s alleged fraud was uncovered. And while the former CEO previously denied the accusations against him, he left the country in early April alongside Dong Xue, the company’s former senior vice president. Xunlei called both on Chen and Dong to return to the country and cooperate with the ongoing police investigation. 

The news about Chen’s alleged embezzlement and fraud shook the company, whose stock price kept rising throughout the summer despite the overall bad market conditions. Xunlei’s stock price dropped nearly 8% yesterday after the popular online streaming and software company announced the news about Chen’s investigation.