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E-Commerce Fraud Forces Alibaba To Replace Internet Executives In China

The chief executive officer and chief operating officer of Chinese e-commerce behemoth Alibaba.com Limited have resigned after the company admitted that about 100 of its own sales people were involved in allowing fraudulent storefronts on its international online marketplace.

Alibaba said that members of its senior management knew of a noticeable increase of fraud claims by global buyers against China Gold Supplier customers on the international marketplace that began in late 2009 and persisted through much of 2010. Alibaba reportedly began to terminate the China Gold Supplier customers involved and to take other steps to address the problem beginning in the third quarter of 2010.

These fraudulent sellers usually provided high-demand consumer electronics at very attractive prices, a low minimum order quantity and less reliable payment transfer methods. The average value per claim by buyers against fraudulent suppliers was, according to Alibaba, less than USD1,200.

The company’s internal investigation revealed that 1,219 of its company’s China Gold Supplier customers who signed up in 2009 and 1,107 China Gold Suppliers who signed up in 2010 engaged in fraud against Alibaba.com’s buyers. According to the company, these suppliers represent approximately 1.1% and 0.8% of the total number of its company’s Gold Suppliers as of December 31, 2009 and December 31, 2010, respectively.

David Zhe Wei, CEO and executive director of the company, has resigned. Jonathan Zhaoxi Lu, current CEO of Tao Bao Holding Limited that runs the Taobao.com website, will replace Wei. Elvis Shi-Huei Lee, chief operating officer at Alibaba.com Limited, has also resigned, but the company has not yet named a successor.

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Comments (2)

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  1. Ulf Wolf says:

    When it comes to online scams and frauds, I would just like to add that the best way I know to guard against being ripped off by online sales or auctions, Penny, Craigslist and eBay included—and whether seller or buyer—is to use a bona fide online escrow company. This is especially true for pricier items like antiques, jewelry and autos. Yes, it does add some cost, but it takes the uncertainty out of the transaction, and that is usually a small price to pay for peace of mind.

    For my money, the best bona fide online escrow (and there seems to be ten or twenty fraudulent escrow sites for every bona fide one) is Escrow.com (escrow.com). In fact, that is the only site that eBay recommends, and is the only online escrow company that is licensed to provide escrow services all across the United States.

    PS. You can find more information about battling online scams and frauds at Online Escrow at WordPress.com (onlineescrow.wordpress.com/)

  2. TD says:

    I’ve been yelling and screaming about this for months!! Alibaba failed to live up to its promises guys and they never answered our emails. This is too late and too bad!!!!

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