Business

Arrests Made in China Over Alibaba Fraud Case

Chinese police have arrested 36 suspects for allegedly operating scams that netted US$6.6 million from customers from customers of e-commerce platform Alibaba.com and other sites.

The arrests were made in the Chinese city of Putian in April, but were only disclosed on Wednesday at a news conference held by Alibaba and Hangzhou's public security bureau.

The arrested suspects operated by pretending to be legitimate suppliers on Alibaba.com, a business-to-business platform that helps connect Asian manufacturers with global buyers.

The alleged scammers would receive payments for orders, without shipping the goods, according to Alibaba spokeswoman Jasper Chan. At other times, the suspects would ship goods of lower quality than was advertised.

In addition to Alibaba.com, the suspects used others sites to scam customers, said Chan. The Chinese police have yet to name those sites, she said.

The 36 suspects are believed to be involved in fraud cases that had threatened to damage the reputation of Alibaba.com. In February, the company revealed that 2,326 suppliers on the site had engaged in scams against overseas buyers from 2009 to 2010. The fraud was so extensive that 100 sales people, along with several supervisors and sales managers were found responsible for allowing the crimes to evade detection.

Alibaba.com, and its parent company Alibaba Group, have sought to reassure customers of the site's safety. Alibaba.com's CEO and COO both resigned in response to the fraud cases, while employees involved with the fraud were terminated. Alibaba has also paid $1.94 million to compensate buyers who were victims on the fraud.

The 36 suspects, however, were only responsible for part of the fraudulent transactions committed on Alibaba.com, Chan said. The company has been assisting Chinese police to track down other suspects involved with e-commerce scams.

Following the disclosure of the fraud cases, Alibaba.com has taken new measures to prevent scams from taking place. Since February, the number of fraud complaints received monthly by Alibaba.com has declined 70 percent, according to the company.

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