Alibaba.com, the largest e-commerce site in China, announced today that two senior executives had resigned after an internal investigation found a rise in fraudulent activity on the site.
Chief Executive Officer David Wei and Chief Operating Officer Elvis Lee Shi-Huei were not involved in the rise in fraud but were taking responsibility for the "systemic breakdown" in the company's "culture of integrity," Alibaba Chairman Jack Ma said in a statement (PDF).
More than 2,300 fraudulent storefronts registered on the site in 2009 and 2010 as "Gold Suppliers," offering inexpensive electronics for sale to buyers overseas. However, no goods were delivered after payment was received, Ma said. The average buyer claim against fraudulent sites was less the $1,200, he said.
About 100 company sales people out of the company's approximately 5,000-member staff assisted the storefronts in evading the company's verification methods, Ma said.
"Our company has determined that the vast majority of these storefronts were set up to intentionally defraud global buyers," Ma said. "The methods of the perpetrators suggest that they have engineered an organized and systemic attack on the integrity of the Alibaba.com platform for illegal gains."
Taking over for Wei is Jonathan Lu, chief executive of sister company Taobao.com, an online shopping Web site.
Alibaba, which has 53 million registered users worldwide, is 40 percent owned by Yahoo and runs Yahoo's Chinese search engine.