What happened

Shares of Xunlei Ltd. (NASDAQ:XNET) closed Wednesday trading 31.1% lower after the Chinese cloud-based acceleration technology company offered clarification on its approach to its digital token product, Wankebi, and its dispute with Shenzhen Xunlei Big Data Information Services Company (aka, "Big Data").

More specifically, Xunlei stated that while it does own a 28.77% equity interest in Big Data --  it has "no management control" over the company. As such, and to "protect the interests of the company," Xunlei has terminated Big Data's right to use the Xunlei brand name, effective immediately.

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So what

Xunlei, for its part, has rallied over the past two months following the introduction of its "Wanke coin mining" cryptocurrency project -- though management has repeatedly expressed their hope that investors favor the company for its vision for shared computing "rather than for speculation."

Xunlei effectively reiterated that in its clarification today, stating:

The company believes that Wankebi is a kind of digital asset and can be used on the company's internet properties and should not be traded on other transaction platforms. When developing blockchain technology, the company utilizes such features as openness, transparence and security for their applications. Wankebi is only a symbol of proof for these applications, rather than a subject of speculation.

Now what

Xunlei clarified on its social media accounts that business units such as "Xunlei Finance," "Xunlei Yidai," and "Xunlei loves trade" belong to Big Data and its subsidiaries, and were not developed under Xunlei. It also insisted that it intends to strictly abide by laws and government regulations -- a reference to China's recent banning of cryptocurrency trading.

Meanwhile, Big Data issued a response arguing that the establishment of the company and its subsidiaries were approved by Xunlei's board, and asserting that it has the legal right to continue using the Xunlei logo.

In any case, it's clear that Xunlei is trying to distance itself from Big Data's cryptocurrency-centric products, continued association with which could land the company in significant regulatory trouble in China. But that also means turning off investors who were looking to the stock as a play on the potentially lucrative -- albeit terribly volatile -- cryptocurrency market. As such, it's no surprise that some shareholders took their profits off the table today.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.