Alibaba will pay $250 million to settle lawsuit over pre-IPO warning about the fight against counterfeiting

NEW YORK (Reuters) – Alibaba Group Holding Ltd said on Monday it will pay $250 million for the settlement of a U.S. lawsuit error in the Chinese e-commerce company for the hide of an administrative warning about the possibility to stop counterfeiting before it went public in 2014.

FILE PHOTO: The logo of the Alibaba Group is seen at the company’s headquarters in Hangzhou, Zhejiang province, China, 20 July 2018. REUTERS/Aly Song

The lawsuit accused Alibaba of securities fraud for failing to disclose it had had with the chinese 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 slid 12.8 percent on Jan. 28-29, 2015, after the SAIC issued a white paper on the basis of objections at the meeting, saying many products sold on Alibaba sites were fake or infringing on trademarks.

The white paper also said the SAIC delayed release of its findings, so that the IPO would not be affected.

Monday proposed class action settlement covers investors in Alibaba ADS, and ADVERTISING options in the 4-1/2 months prior to the release of the white paper which was later withdrawn.

The agreement, which requires the approval of the court, also resolves claims against Alibaba officials including the billionaire founder and Chairman Jack Ma.

Alibaba denied wrongdoing. It said the settlement ends all outstanding securities with legal proceedings against the company, its executive officers and directors.

In the court papers, the plaintiffs lawyers, called the agreement “inherently fair, reasonable, and adequate,” citing potential obstacles to show that Alibaba made false representations and intended to commit fraud.

The lawyers can seek up to 25 percent of the liquidation of the fund for the legal fees, the papers show. She had not immediately respond to requests for additional comments.

The Chinese company has long faced the accusation that their online platforms are a paradise for counterfeiters, such as in court cases by luxury brands such as Gucci and Yves Saint Laurent.

Alibaba, Inc., eBay Inc. and other such companies have a policy to prohibit counterfeiting, and described their investments to thwart the practice.

On 3 April, the AMERICAN President Donald Trump, ordered an action against counterfeit online, saying global transactions in counterfeit and pirated goods could reach $500 billion per year.

The case is re-Alibaba Group Holding Limited Securities Litigation, U. S. District Court for the Southern District of New York, No. 15-md-02631.

Reporting by Jonathan Stempel in New York; editing by Franklin Paul and Steve Orlofsky

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