The complaint, filed in the United States District Court for the Southern District of New York, centers on a significant disconnect between Alibaba’s public risk disclosures and internal realities. While the company’s 2026 Annual Report characterized the unauthorized distillation of third-party AI models as an inadvertent or hypothetical risk, the lawsuit claims a large-scale campaign against Anthropic’s Claude model was already underway. Plaintiffs allege that approximately 25,000 fraudulent accounts were used to execute 28.8 million exchanges with the Claude model between April and June 2026.

Financial disclosures further exacerbated investor concerns when the U.S. Department of Defense updated its list of Chinese military companies on June 8, 2026, naming Alibaba due to its affiliation with the Ministry of Industry and Information Technology. This development contradicted previous filings that suggested the company’s operations were routine value-added telecommunications services. Following these disclosures, Alibaba’s American Depositary Shares experienced a sharp decline, dropping from a peak of $173.68 in October 2025 to $95.07 by June 25, 2026, representing a loss of roughly 45% in market value. Joseph E. Levi, representing the plaintiffs, stated that the company’s failure to accurately categorize these risks left shareholders unable to properly price their investments.