The litigation centers on a significant decline in Alibaba’s market value, which fell from a high of $173.68 in October 2025 to $95.07 by June 2026—a loss of approximately 45 percent. According to the filing in the United States District Court for the Southern District of New York, Alibaba's 2025 and 2026 annual reports failed to disclose critical risks regarding its affiliation with China's Ministry of Industry and Information Technology. Plaintiffs argue these omissions concealed the firm's classification under the FY2025 National Defense Authorization Act.

Legal counsel Joseph E. Levi asserts that the company characterized the unauthorized use of third-party AI models as a mere forward-looking risk in its May 2026 filings, despite an internal campaign already being underway. The situation intensified in June 2026 when the U.S. Department of Defense added Alibaba to its list of Chinese military companies, followed by accusations from Anthropic PBC that the firm illicitly accessed its Claude model through thousands of fraudulent accounts. Investors have until October 5, 2026, to seek lead plaintiff status in the ongoing proceedings.