E-Commerce Giant and Payment Firm to Pay $600 Million Over Illegal Drug Sales

Alibaba and its U.S. payment processor agreed to pay $600 million to settle federal allegations that they allowed merchants to sell prohibited pharmaceuticals and pill-making equipment to American buyers.

E-Commerce Giant and Payment Firm to Pay $600 Million Over Illegal Drug Sales

A major Chinese online retailer and its American payment arm will pay $600 million to resolve federal claims that they failed to stop merchants from peddling banned drugs and manufacturing gear to customers in the United States.

The U.S. Department of Justice announced that Alibaba Group Holding and AUS Merchant Services entered non-prosecution agreements after admitting their platforms facilitated roughly 80,000 illegal transactions between early 2016 and late 2024. The goods included prescription medications without approval, controlled substances, precursor chemicals, and tablet presses used to manufacture pills.

Investigators said the total value of these sales surpassed $200 million. Federal agents conducted dozens of covert purchases to verify that the items could be shipped into the country unlawfully.

According to the settlement documents, staff members at the e-commerce firm had previously warned that existing safeguards were too weak to catch violators. Merchants allegedly used the company's built-in chat function to negotiate deals away from public view, and in some cases redirected purchasers to external encrypted messaging services to complete sales.

The payment subsidiary, previously operating under the name Alipay US, acknowledged that its transaction surveillance system had holes. From 2020 through 2023, it did not fully integrate wire-transfer information, which meant it sometimes overlooked payments originating from risky areas or involving several contributors for a single order. Instead of blocking vendors who offered forbidden merchandise, the firm occasionally just flagged them to its parent company — and at least one such vendor kept selling to U.S. buyers afterward.

The financial breakdown includes a $125 million criminal fine and $200 million in forfeiture for the retail platform, plus an $85 million penalty and $190 million forfeiture for the payment processor. Both entities pledged to upgrade their internal compliance frameworks and assist authorities with any related probes.

Federal officials emphasized that digital marketplaces and their financial partners bear responsibility for keeping illicit products off their systems, regardless of where their headquarters are located.

Source: DOJ Justice News