Securities Regulation Daily Wrap Up, PUBLIC COMPANY REPORTING AND DISCLOSURE—S.D.N.Y.: Class action claims Alibaba hid its status as Chinese military company, (Aug 6, 2026)
Law Firms Mentioned:Rosen Law
Organizations Mentioned:Adhia Derivative Fund, LP | Alibaba Group Holding Ltd.
The shareholder also claims that Alibaba mispresented its use of AI as hypothetical when it was allegedly carrying out distillation attacks against Anthropic’s Claude AI model.
A shareholder of Chinese tech company Alibaba Group Holdings filed a complaint alleging that the company and its CEO artificially inflated the company’s stock price by including misrepresentations regarding the company’s status as a Chinese military company and its use of AI in its 2025 and 2026 annual reports. The shareholder claims that Alibaba shareholders suffered damages when the company’s stock price fell after information contradicting Alibaba’s disclosures was made public (Wistisen v. Alibaba Group Holding Ltd., No. 1:26-cv-06654 (S.D.N.Y. Aug. 24, 2026)).
Alibaba is a Chinese company specializing in e-commerce, retail, Internet, and technology services that must obtain an operating license from the Chinese Ministry of Industry and Information Technology (MIIT). Its affiliation with MITT makes Alibaba a Chinese military company under the National Defense Authorization Act.
2025 annual report. The shareholder alleges that in its 2025 annual report, Alibaba failed to disclose its status as a Chinese military company at a time when the U.S. prohibited investments by any U.S. persons in certain Chinese companies deemed to be owned or controlled by the Chinese military.
The shareholder argues that Alibaba understood the risks that it faced because it disclosed that other Chinese companies such as China Telecom, China Mobile, and China Unicom had been delisted from the NYSE. However, Alibaba failed to warn investors that it was subject to similar risks.
2026 annual report. In its 2026 annual report, Alibaba discussed its use of AI, saying that AI systems require vast volumes of data for training and inference, which increases the risk of data breach and misuse. The company stated “during training and inference, our models may inadvertently access and reproduce sensitive business or personal information. Such incidents could result in violations of data protection laws and regulatory actions and penalties.”
The shareholder claims that these statements were materially false and/or misleading because they presented the company’s distillation of third-party models as a mere hypothetical or inadvertent at a time that it was carrying out distillation attacks against Anthropic’s Claude AI model.
The shareholder notes that in June 2026, the U.S. Department of Defense released an updated list identifying Chinese military companies that included Alibaba. In the same month, Bloomberg published an article titled “Anthropic Accuses Alibaba of ‘Illicitly’ Accessing AI Models”. Alibaba’s share price dropped after the release of both pieces of news, and the shareholder claims that he and other shareholders suffered significant losses due to Alibaba’s misstatements and omissions.
The shareholder argues that the defendants acted with scienter because they knew that the public documents and statements issued in the name of the company were materially false and misleading. They also knowingly and substantially participated in the issuance or dissemination of such statements in violation of the securities laws, according to the shareholder.
The shareholder alleges violations of 1934 Act Section 10(b) and Rule 10b-5, as well as violations of 1934 Act Section 20(a) by the CEO.
The case is No. 1:26-cv-06654.
Attorneys: Phillip C. Kim (Rosen Law) for Carl Wistisen.
Companies: Alibaba Group Holding Ltd.
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