Alibaba Faces Class Action Lawsuit Over Alleged AI Misconduct

The lawsuit, filed in the United States District Court for the Southern District of New York, centers on claims that Alibaba misled the public by framing significant operational risks as merely hypothetical. According to the complaint, the company’s annual reports downplayed the unauthorized distillation of third-party AI models—specifically Anthropic’s Claude—as an inadvertent possibility, even as a large-scale campaign involving roughly 25,000 fraudulent accounts was reportedly underway.

Beyond AI concerns, the litigation targets Alibaba’s disclosure of its relationship with the Chinese Ministry of Industry and Information Technology. While the company described its operations as routine, the U.S. Department of Defense officially designated Alibaba a Chinese military company on June 8, 2026. This revelation, paired with accusations from Anthropic later that month, triggered a sharp decline in share value. The stock, which reached a high of $173.68 in October 2025, plummeted to $95.07 by June 25, 2026, representing a loss of approximately 45% of its market value.