Three law firms are accusing Xethanol of:
1. Misrepresenting management's experience and standard of ethics
2. Omitting disclosing a series of related-party transactions and association with investors who had alarming records of stock fraud and related shareholder abuses
3. Materially overstating the Company's profitability by under-reporting the true costs associated with completing a biomass-to-ethanol production facility, and by failing to make proper adjustments to the Company's financial reports
4. Lacking any reasonable basis to assert that the Company was operating according to plan or could achieve the near-term commercialization of biomass ethanol production, or achieve the guidance sponsored and/or endorsed by the Company
5. Causing plaintiffs and other Class members to purchase Xethanol common stock at artificially inflated prices
These lawsuits are on behalf of shareholders who "purchased, exchanged or otherwise acquired" the common stock of XNL between January 31st, 2006 and August 8th, 2006. Skeptics believe these lawsuits have different intentions as a poster on the Yahoo! Xethanol Message Board said, "Why sue myself...How much money do you expect to get from a class action lawsuit when Xethanol itself is one of the defendants? As a shareholder of Xethanol, you are ALSO a defendant." The shareholders who may participate in this class action lawsuit will most probably receive very little money, as the more shareholders that join the larger the dilution. Lawyers on the other hand, if successful, will be the "winners." When filing the lawsuits, the lawyers didn't even have to do their own research; their reasoning is directly from the Sharesleuth report. Are the lawyers actually trying to protect the shareholders? Or are they manipulating Xethanol's vulnerability? Nevertheless XNL's image is once again questioned.
Xethanol claims that these lawsuits are without merit as they briefly rebut this in a previous article. Xethanol, though, should do a better job in convincing shareholders that they are reliable. "Keeping quiet" shows their inability to disprove these lawsuits. Though this negative attention is creating pessimism, the declining price can be an excellent buying opportunity. If the lawsuit is not able to succeed, then shareholders can put the past behind them.