Summary:

A huge executive shakeup at Yahoo-linked Chinese e-commerce giant Alibaba.com: CEO David Wei and COO Elvis Lee have both resigned, after the…

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photo: Getty Images / Guang Niu

A huge executive shakeup at Yahoo-linked Chinese e-commerce giant Alibaba.com: CEO David Wei and COO Elvis Lee have both resigned, after the company determined that some employees had facilitated widespread fraud on the site. According to a press release (via LATimes), an internal investigation found that more than 1,000 of the company’s customers cheated buyers, and Alibaba.com says that about 100 of its sales people were “directly responsible in either intentionally or negligently allowing the fraudsters to evade our company’s authentication and verification measures.”

Alibaba.com says Wei and Lee were not involved but nevertheless says they asked to “take responsibility for the systemic break-down in our company’s culture of integrity.” Wei is being replaced as CEO by Jonathan Lu, the CEO of sister site Taobao. It will be worth watching whether the executive move will now change Alibaba.com’s strategy. Under Wei, the company had expanded its operations aggressively in the U.S. over the last two years, buying several companies and spending heavily on advertising here.

Alibaba.com is controlled by Alibaba Group, which in turn is 44 percent owned by Yahoo (NSDQ: YHOO). Both Yahoo and Alibaba have fought over that relationship, although most recently Alibaba had said it had “moved on” from trying to buy back Yahoo’s stake. Yahoo’s Alibaba holdings are worth less today; the company’s stock was down nearly 3.5 percent on the Hong Stock Exchange. (Updated: Bloomberg clarifies that the drop happened before the announcement went out).

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