Most intriguingly, the American regulator is also scrutinising how the company has handled its many related-party transactions. Jack Ma, the firm's founder, caused outrage when he unilaterally spun off AliPay, Alibaba's lucrative online-payments arm, in 2011 into an entity that he controlled. That business, now known as Ant Financial Services Group, is valued at $60 billion and is heading for a public flotation.

Where will this SEC action lead? It could be a routine inspection of the sort most public companies can expect from time to time. Alibaba certainly denies any wrongdoing, noting that it is co-operating with the authorities and voluntarily disclosing the fact that it is under investigation. But if the regulators do uncover evidence of real misconduct, things could get nasty for China's most celebrated firm.