Alibaba Illegal Sales Settlement
Alibaba, AUS Merchant Services Pay $600 Million to DOJ for Failing to Stop Illegal Sales
Key Points
On July 1, 2026, Alibaba Group and AUS Merchant Services agreed to non-prosecution deals to pay $600 million to resolve DOJ allegations related to illegal sales on their platforms.
U.S. investigators highlighted gaps in AUS's anti-money-laundering controls, noting that from 2020 through 2023 it accepted U.S.-dollar payments (credit cards and wire transfers routed through U.S. banks) before funds were moved offshore, and that its transaction-monitoring system did not fully incorporate wire-transfer data.
The DOJ cited prohibited items including List I and II chemicals and pharmaceutical counterfeiting equipment such as pill presses as part of the alleged illegal sales tied to Alibaba’s platforms.
Alibaba Group and its U.S. payment processor AUS Merchant Services agreed on July 1, 2026, to pay $600 million to settle federal allegations tied to illegal drug sales. The U.S. Justice Department says the two companies failed to stop merchants from selling illegal pharmaceuticals, controlled substances, and drug-making equipment through Alibaba.com and AliExpress between 2016 and 2024, according to Morningstar.
The deal is a non-prosecution agreement, meaning neither company faces criminal charges if they meet its terms. It is the largest monetary resolution in the history of the District of Rhode Island, according to The Wall Street Journal.
80,000 Illegal Sales Tied to Alibaba Platforms
DOJ investigators identified roughly 80,000 illegal sales on Alibaba's platforms over eight years. The combined value of those transactions was about $200 million. Prohibited items included List I and II chemicals — ingredients used to make drugs — and pill presses used to manufacture counterfeit pills, according to Morningstar.
Alibaba had internal policies meant to block such sales. But some employees warned those protections were not strong enough. Merchants reportedly used Alibaba's private-messaging service to finalize illegal deals and avoid detection, according to The Wall Street Journal.
AUS Payment System Left Illegal Transactions Unchecked
AUS Merchant Services — a subsidiary of Ant International, the fintech arm of Alibaba's affiliate — admitted its anti-money-laundering program had serious gaps. From 2020 to 2023, AUS accepted U.S. dollar payments through American banks before moving funds offshore. Its transaction-monitoring system did not include wire-transfer data, leaving a major blind spot, according to Morningstar.
In some cases, AUS flagged suspicious merchants but simply sent them back to Alibaba rather than blocking them outright. Assistant Attorney General Tysen Duva said the settlement means "another channel for illegal pharmaceuticals and associated equipment is now closed."
$600 Million Split Between Alibaba and Its Payment Arm
Alibaba will pay $325 million in total — a $125 million criminal penalty plus $200 million in forfeiture. AUS Merchant Services will pay $275 million — an $85 million criminal penalty plus $190 million in forfeiture. The $600 million total is steep but equals roughly 0.4% of Alibaba's reported FY2026 revenue of $148.4 billion, according to Morningstar.
Alibaba's stock held near $96 after the announcement. Analysts said the settlement removes the "cloud of uncertainty" that had hung over the company during the multi-year investigation. Both companies must also cooperate with U.S. law enforcement going forward.
Settlement Signals Tougher U.S. Stance on E-Commerce Platforms
Legal experts say the case marks a shift in how U.S. authorities apply drug laws to third-party online marketplaces. For the first time, a payment processor is held liable for routing funds from illegal sales rather than cutting off merchants. First Assistant U.S. Attorney Charles Calenda said the resolution reflects a commitment to "holding companies accountable when their platforms are used to facilitate the unlawful sale of illegal pharmaceuticals."
The settlement lands as Alibaba faces broader U.S. pressure. Just days earlier, on June 25, the company filed a lawsuit against the Pentagon seeking removal from a list of firms with alleged Chinese military ties, according to The Wall Street Journal. Taken together, the legal battles show a company navigating sharp friction with Washington on multiple fronts.
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