Two executives of product sourcing directory Alibaba.com, including the CEO, have resigned over the revelation that 1% of the company's Gold suppliers were set up to defraud buyers.

An internal Alibaba investigation discovered that 1,219 of the company’s China Gold Supplier customers who signed up in 2009 and 1,107 China Gold Suppliers who signed up in 2010 engaged in fraud against buyers. This amounts to 1.1% and 0.8% of the total number of Gold Suppliers at the end of 2009 and 2010 respectively.

Alibaba found that the vast majority of these suppliers were set up to intentionally defraud global buyers, often by offering high-demand consumer electronics with low prices, a low minimum order quantity and less reliable payment transfer methods. The average claim value against these fraudulent suppliers was under US$1,200. The company also determined that 100 of their 5,000 sales people, along with supervisors and managers, were responsible for intentionally or negligently allowing the fraudsters to evade verification measures and systematically establish fraudulent storefronts on the international marketplace. Members of senior management were found not to be involved.

"One of our most important values is Integrity. That means integrity of our employees and integrity of our online marketplaces as trusted and safe places for our small business customers," said Mr. Jack Ma, non-executive Chairman of our Company. "We must send a strong message that it is unacceptable to compromise our culture and values. It saddens me to see talented people leave the Company, but [the executives resigning] are doing the honorable thing to accept full responsibility for this, and I want to thank them for their tireless service to the Company."