Executives at Alibaba resign amid fraud investigation

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Alibaba.com Ltd., China’s largest e-commerce website, announced the resignation of two of its most senior leaders Monday after an internal investigation found more than 2,000 fraudulent virtual storefronts had been set up with the help of company salespeople.

In a company statement, Alibaba.com said Chief Executive David Wei and Chief Operating Officer Elvis Lee were not involved in the scams but wanted to shoulder responsibility for the “systemic break-down’ in Alibaba.com’s ‘culture of integrity.”

Wei is being replaced by Jonathan Lu, chief executive of sister company Taobao.com, a hugely popular online shopping website. Alibaba.com is the flagship site of Alibaba Group, a multibillion-dollar Internet empire headed by one of China’s most charismatic business figures, Jack Ma.

In addition to Taobao, the company owns Yahoo’s China operations and Alipay.com, an online payment service. 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 shutdown those storefronts but that the investigation was ongoing.

Alibaba.com shares fell 3.5% in trading in Hong Kong on Monday before the announcement.

-- David Pierson