Alibaba, payment processor, to pay $600 million in DOJ settlement

Alibaba Holdings Ltd., the technology and ecommerce giant based in China, and its payment processing partner in the United States, AUS Merchant Services, are paying $600 million to resolve Department of Justice allegations that they allowed merchants to import illegal pharmaceuticals and other restricted items into the United States.

Alibaba admitted to the DOJ as part of a non-prosecution agreement (NPA) that between January 2016 and December 2024 its Alibaba.com and AliExpress.com platforms were used to facilitate approximately 80,000 sales of chemicals for delivery into the United States that are prohibited under the Controlled Substances Act, as well as pharmaceuticals and pharmaceutical counterfeiting equipment prohibited under the Food, Drug and Cosmetic Act.

The items had a combined gross merchandise value exceeding $200 million, the DOJ said.

AUS Merchant Services, a subsidiary of Ant Group that was formerly known as Alipay, also entered into an NPA with the DOJ. In doing so, it admitted that between January 2020 and December 2023, it accepted U.S. dollar-denominated payments through credit card and wire transfer transactions routed through U.S. bank accounts before transferring the money offshore for settlement on behalf of customers.

Undercover purchases

As part of its investigation, federal law enforcement agencies conducted more than 40 undercover purchases of pharmaceuticals and counterfeiting equipment that were illegal imports under U.S. laws.

Although Alibaba maintained policies restricting the sale of prohibited products on its ecommerce sites, employees raised concerns that the company's compliance controls were inadequate and failed to prevent the sale and importation of illegal products.

Alibaba also provided merchants and buyers with a private messaging service that some merchants used to facilitate unlawful transactions, the DOJ stated in a July 1, 2026, press release. In some instances, merchants used the messaging service to direct buyers to third-party encrypted messaging platforms to facilitate unlawful transactions, according to the DOJ.

"Alibaba derived some profit related to those sellers' illegal activities on Alibabs.com by charging membership, marketing, advertising, shipping and payment processing fees," the department explained in its press release.

Penalties and forfeitures

As part of the NPA, Alibaba and AUS accepted responsibility for the acts of their officers, directors, employees and agents in connection with the illegal imports. Alibaba agreed to pay a criminal monetary penalty of $125 million and to forfeit $200 million. AUS agreed to pay a criminal monetary penalty of $85 million and to forfeit $190 million.

Alibaba and AUS also agreed to enhance their compliance programs, to undertake remedial measures, and to continue cooperating with the government in any ongoing or future criminal investigations related to activities described in the NPA, the DOJ stated.

"Today's resolution reflects the Department of Justice's commitment to ensuring that companies operating eCommerce and digital payment platforms keep illegal, unapproved, misbranded and dangerous foreign pharmaceuticals off their marketplaces," said Assistant Attorney General Brett Shumate. "Companies operating online marketplaces – whether based in the United States or abroad – must implement appropriate safeguards to prevent bad actors from exploiting their platforms. If they fail to do so, the Department will hold them accountable."

Remedial steps

"Alibaba and AUS have documented steps taken to improve their screening and compliance and provided a commitment to ongoing cooperation with U.S. law enforcement in the future," said Assistant Attorney General Tysen Duva.

The $600 million resolution with Alibaba and AUS "achieves meaningful accountability while securing significant compliance measures designed to strengthen oversight, prevent future violations and better protect American consumers," said Charles Calenda, First Assist U.S. Attorney for the District of Rhode Island.

"This non-prosecution agreement, financial restitution and required compliance reforms makes clear that global eCommerce companies must build systems that prevent the sale and distribution of illegal products before they reach the United States and the U.S. banking system," said John Condon, acting executive associated director of the Department of Homeland Security's investigations unit.

A spokesperson for Alibaba, in a statement to the Wall Street Journal, described the agreement as a "mutually satisfactory resolution" to the errant activities.

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