Over 1,000 of Alibaba’s customers have reportedly been defrauded in a major security bypass within the Alibaba organization. According to PaidContent, CEO David Wei and COO Elvis Lee have both resigned, though it has been claimed that neither of them were directly involved with the defrauding, though they are personally taking responsibility for the breakdown in the corporate culture that allowed it to happen.

The company is 44% owned by Yahoo, and Yahoo apparently has no plans of relinquishing that control. That might be a bit easier for Yahoo to stomach, had an internal investigation not turned up today’s findings:

…more than 1,000 of the company’s customers cheated buyers, and Alibaba.com says that about 100 of its sales people were directly responsible in either intentionally or negligently allowing the fraudsters to evade our company’s authentication and verification measures.

There is no word yet as to what Alibaba intends to do in order to rectify the situation, but the managerial shake-up should serve as a powerful catalyst to get the company back in control.