David 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.