Alibaba Pays $250 Million to Settle Lawsuit Over Pre-IPO Counterfeiting Warning
NEW YORK (Reuters) - Alibaba Group Holding Ltd said on Monday it will pay $250 million to settle a U.S. lawsuit faulting the Chinese e-commerce company for concealing a regulatory warning about its ability to stop counterfeiting before it went public in 2014.
The lawsuit accused Alibaba of securities fraud for failing to disclose it had met with China’s State Administration for Industry and Commerce on July 16, 2014, two months before the company’s $25 billion initial public offering.
Alibaba’s American Depositary Shares fell 12.8 percent on Jan. 28 and 29, 2015 after the SAIC issued a white paper based on concerns raised at the meeting, saying many products sold on Alibaba websites were fake or infringed trademarks.
The white paper also said the SAIC delayed releasing its findings so the IPO would not be affected.
While the white paper was later withdrawn, seven proposed U.S. class-action lawsuits were filed on behalf of ADS investors over the share price decline, before being consolidated.
Alibaba said it did not admit wrongdoing in agreeing to the settlement, which requires court approval.
Settlement papers were not immediately available. The investors’ lawyers did not immediately respond to requests for comment.
Alibaba has long faced accusations that its online platforms are a haven for counterfeiters, including in lawsuits by luxury brands such as Gucci and Yves Saint Laurent.
Companies including Alibaba, Amazon.com Inc and eBay Inc have policies banning counterfeiting, and highlighted their investments to thwart the practice.
On April 3, U.S. President Donald Trump ordered a crackdown on online counterfeiting, saying global transactions in fake and pirated goods could reach $500 billion annually.
The settlement covers investors in Alibaba ADS and ADS stock options from Sept. 19, 2014 through Jan. 29, 2015. The lead plaintiffs are Christine Asia Co and William Tai.
The case is In re Alibaba Group Holding Limited Securities Litigation, U.S. District Court, Southern District of New York, No. 15-md-02631.
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