Alibaba’s CEO resigns over fraudulent suppliers

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alibabaDavid Wu, the CEO of Chinese ecommerce group Alibaba.com, has resigned after an investigation into fraudulent merchants operating on the site.

The investigation found that in 2009 and 2010, 2,326 (around 1%) of Alibaba’s ID-verified China Gold Suppliers engaged in fraud. The company believes that the vast majority of them were set up “to intentionally defraud global buyers”. The store fronts offered “high-demand consumer electronics at very attractive prices, a low minimum order quantity and less reliable payment transfer methods”. All have subsequently been closed down.

What’s particularly damaging for Alibaba is that there seems to have been collusion from their own staff: the company’s statement says:

about 100 sales people, out of a field sales force of about 5,000, as well as a number of supervisors and sales managers, are directly responsible in either intentionally or negligently allowing the fraudsters to evade our Company’s authentication and verification measures and systematically establish fraudulent storefronts on the international marketplace.

The company says that the average fraud claim against the merchants concerned was less than US$1,200 (approx. £740).

Chief Operating Officer, Elvis Lee, has also resigned. Though there is no suggestion that either Mr Wu or Mr Lee was involved in the fraudulent activity, an Alibaba statement said that “they take responsibility for the systemic break-down in our Company’s culture of integrity”. Jonathan Lu, CEO of Alibaba sister-company Tao Boa Holding, takes over as CEO from Mr Wu.

Here’s the full announcement from Alibaba.

19 Responses

  1. If they want to become a world brand they’ll have to clean up their act. I still think Alibaba’s going to take eBays crown away and stop their growth plans.

  2. Thankfully we use a great shipping Co’ that has local agents on the ground around the whorld.
    If we want to buy from someone, we just ask them & their chaps ‘pop round’ an have a good look.

    Probably saved us a few times…!!

  3. Another example,

    China Subsidises all its petrol and diesel.

    America is the biggest oil consumer in the world.

    Sit down and think about it logically.

  4. too right
    asian basic ethos and the way they do things will just not work with western customers ebay has nought to fear in America and europe

  5. This whole forum is full of comments with people who find fault with eBay, so why is eBay any better than Alibaba all of a sudden. The funniest thing for me is every one complaints if they lose their top rated seller status and lose sales as a result. Get real, move away from eBay. Run your business for yourself and not for eBay. If you kick a dog and the dog comes running back for more there something wronge with the dog. If eBay kick you and you come running back for more their something wronge with you. eBay is still a good place to sell, but if its a better place to sell than your own website, there something wronge with your business plan.

  6. I was just thinking about Integrity. Can you imagine the total Chaos if Politicians were to resign just because their Department fouled up? Or Businessmen Resigned because their Company polluted the local Stream or River. Or the Doctor Resigned just because he cut off the wrong leg? Or the Civil Servant Resigned just because they were totally Incompetant at their job. Or the Bureaucrat Resigned just because they were caught taking bribes? Good God lets be reasonable. This is getting out of hand.

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