(CN) - Alibaba's initial public offering raked in more than $25 billion while the Chinese e-commerce behemoth faced a probe into bribery and counterfeiting, a federal class action alleges.
Manishkumar Khunt filed the complaint Monday in Manhattan against Alibala Group, CEO Jack Yun Ma, and three other individuals. Another investor, Devorah Klein, filed similar allegations in the same court Tuesday.
Alibaba is a Chinese e-commerce company that provides an online portal linking Chinese manufacturers with overseas buyers. It also runs Alipay, an online payment service, and the online shopping website Taobao.
The company bills itself as "the largest online and mobile commerce company in the world in terms of gross merchandise volume," according to the complaint.
Alibaba's initial public offering in late September 2014 raised $25 billion, but investors now say that Alibaba knew two months beforehand "that company executives had met with China's State Administration of Industry and Commerce (SAIC) in July 2014 ... and that regulators had then brought to Alibaba's attention a variety of highly dubious - even illegal - business practices that the SAIC advised Alibaba it was then clamping down on and which threatened the core of Alibaba's business."
These practices included the sale of counterfeit goods, such as branded handbags and fake cigarettes, and of restricted weapons.
SAIC also allegedly informed Alibaba that its staff members were taking bribes from merchants to boost their search rankings, engaging in anticompetitive behavior such as forbidding merchants from using rival's sites, and doing nothing to stop merchants from false advertising.
The civil suits come just days after Jan. 28 reports by various financial media that the SAIC had formally issued a white paper accusing Alibaba of engaging illegal activity. News of the accusations caused Alibaba's share price to fall 4 percent on unusually high volume that day.
On Jan. 29 Alibaba released disappointing financial results for the fourth quarter of 2014, missing its revenue target by over $200 million, according to the complaint. It also allegedly reported that profits fell 28 percent from fourth quarter 2013.
The shares slid a further 9 percent, reaching a price down more than 25 percent from its four-month high, according to the complaint.
Alibaba CEO Jack Ma told reporters that the government's findings were mistaken, and the SAIC said Friday that its findings did not have "judicial effect," Voice of America reported .
But investors claim that Alibaba would not have been able to hit the price point of $68 per share in its IPO if it had disclosed the accusations against it.
Alibaba's shares traded Tuesday at $90.10. They reached a high of $119.15 in November 2014.
Samuel Rudman with Robbins, Geller, Rudman & Dowd in Melville, N.Y., represents the class behind Monday's lawsuit. Pomerantz attorney Jeremy Lieberman represents Klein, the plaintiff in Tuesday's action.
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