In a bid to boost their mobile presence, Alibaba buys stakes into Shenzen-based smartphone maker Meizu. (Photo : Reuters)
News of a class action lawsuit against Alibaba Group emerged in an official statement on Friday.
The suit was filed by law firm Robbins Geller Rudman & Dowd in a New York district court on behalf of parties who bought New York-listed Alibaba shares between Oct. 21 and Jan. 28. last year. Four other law firms are also involved in the class action, which was commenced after the biggest drop in Alibaba's stock price was observed since its debut on the New York Stock Exchange in Sept. 2014.
The initiation of legal action was triggered by the latest development in an ongoing conflict between Alibaba, based in the Zhejiang Province, and the State Administration for Industry and Commerce.
According to the administration, results from a quality-check report that it completed last year were not released in a more timely manner so that Alibaba's IPO would not be disrupted.
The governmental watchdog had found that under 40 percent of the goods examined on Taobao, Alibaba's massively popular online shopping platform, were genuine products. The administration's report was published on its website this week, but the Bloomberg media company informed its readers that the document was removed shortly thereafter.
Taobao claims that it has been subject to unfair treatment, while a group of Alibaba's investors have since sought legal support from the five U.S. law firms.
According to Friday's statement, the claimants are seeking to investigate whether Alibaba had "issued materially false and misleading statements regarding the soundness of Company's business operations, the strength of its financial prospects and concealing substantial ongoing regulatory scrutiny."
Meanwhile, chairman and founder of Alibaba, Jack Ma, is no longer China's richest man after his company's shares fell 8 percent on Thursday due to a disappointing earnings report for the three months ending Dec. 31.
