Alibaba Faces $600 Million US Settlement Over Illegal Drug Sales Linked to E-Commerce Platforms

July 2, 2026
By Mintesinot Nigussie

Alibaba Group Holding Limited and its US-based payment processor AUS Merchant Services Inc. have agreed to pay 600 million US dollars to resolve US Justice Department allegations that their platforms were used to facilitate the sale and importation of illegal pharmaceuticals, controlled substances and drug-manufacturing equipment into the United States.

The resolution follows a Justice Department investigation that found Alibaba’s Alibaba.com and AliExpress.com platforms were used between 2016 and 2024 for about 80,000 transactions involving products that violated US federal laws. The transactions included pharmaceuticals, listed chemicals, pharmaceutical counterfeiting equipment and other prohibited goods, with combined gross merchandise value exceeding 200 million US dollars.

Under the non-prosecution agreement, Alibaba will pay a 125 million US dollar criminal penalty and forfeit 200 million US dollars, while AUS will pay an 85 million US dollar criminal penalty and forfeit 190 million US dollars. The companies also agreed to strengthen compliance systems and continue cooperating with US authorities.

The Justice Department said the investigation found that Alibaba maintained policies restricting prohibited products but failed to implement sufficient controls to prevent merchants from using its platforms to conduct illegal transactions.

Some merchants allegedly used Alibaba’s internal messaging tools to arrange sales and direct buyers to encrypted third-party platforms. The company also earned revenue from certain sellers through membership fees, advertising, marketing, shipping and payment-processing services, according to the department.

AUS, which previously operated as Alipay US, admitted that between 2020 and 2023 it processed US dollar-denominated payments linked to some of the transactions through US financial channels. The company acknowledged that weaknesses in its transaction-monitoring system allowed certain high-risk payments to pass through without adequate detection.

The payment processor also admitted that its anti-money laundering controls did not prevent some merchants from using its services to facilitate the sale of prohibited products. In some cases, merchants reported for suspected violations continued operating after internal reviews.

“Companies operating e-commerce and digital payment platforms must implement appropriate safeguards to prevent bad actors from exploiting their platforms,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division.

The agreement represents one of the largest enforcement actions involving an online marketplace over alleged failures to prevent illegal pharmaceutical trade. The Justice Department said the settlement reflects Alibaba and AUS’s cooperation, remedial actions and commitment to improving compliance systems.

The case involved multiple US agencies, including the Food and Drug Administration, Federal Deposit Insurance Corporation Office of Inspector General, Internal Revenue Service Criminal Investigation, Homeland Security Investigations and the US Postal Inspection Service.

The settlement adds pressure on global digital marketplaces and payment providers to strengthen oversight of cross-border transactions, as regulators increasingly examine how online platforms are used to distribute restricted goods.

Source: FSX Business News