Alibaba.com and the 100 thieves: fraud hits top Chinese website
China’s largest e-commerce website acts after more than 2,000 fraudulent virtual storefronts were found to have been been set up with the help of staff.
Two top Alibaba people - Chief Executive David Wei and Chief Operating Officer Elvis Lee - have resigned. They were not involved in the scams, said a company statement, but wanted to shoulder responsibility for the “systemic break-down" in Alibaba.com’s "culture of integrity.”
Alibaba.com is the flagship site of Alibaba Group, a multibillion-dollar Internet empire headed by one of China’s best-known business figures, Jack Ma Yun, says the LA Times.
Founded in 1999, Alibaba.com has become one of the world’s largest business-to-business platforms in the world, linking sellers of Chinese manufactured goods to millions of wholesalers overseas. The company is about 40% owned by Yahoo.
The company said it began noticing a surge in fraud claims in late 2009 and launched a probe. Findings showed that about 100 members of the company’s 5,000-member sales staff helped fraudsters evade steps to authenticate their businesses so they could pretend to sell electronic goods at attractive terms and prices. Alibaba.com said it had shut down those storefronts but the probe is continuing.
The internal investigation found that 1,219 mainland suppliers who signed up for Alibaba.com's "China Gold Supplier" programme in 2009 and 1,107 who signed up last year engaged in fraud against international buyers.
The fake suppliers would typically offer the electronic consumer goods at low prices using dubious payment methods. Often the goods were never delivered, "It was an organised group of people who attacked our platform and got a small percentage of our employees to help them," said John Spelich, vice-president of international corporate affairs at Alibaba Group, parent of the Hong Kong-listed firm.
Flat-screen televisions were one popular scam. It is understood that customers had been defrauded of less than £740 on average. All of the fake storefronts have now been deleted from the site.
“Alibaba is not technically liable for the losses, but has paid out $1.73m from a fund to recompense buyers,” said a spokesman. “We have been paying this money out on a case-by-case basis since 2009 and think this is the total liability. "
Nomura analyst Jin Yoon told the South China Morning Post it was possible more people were implicated than the numbers announced. "There seems to be a lot more to the story," he said
Non-executive chairman Jack Ma Yun, who founded the company with 17 co-founders in 1999, said, "One of our most important values is integrity. That means integrity of our employees and integrity of our online marketplaces as trusted and safe places for our customers.
"We must send a strong message that it is unacceptable to compromise our values. David and Elvis are doing the honourable thing to accept full responsibility for this."