Alibaba Group and its US payment processor AUS Merchant Services agreed on July 1, 2026, to pay a combined $600 million to the US Department of Justice to resolve an investigation into illegal drug sales and imports conducted via their platforms [1, 2, 3].
The settlement addresses allegations that Alibaba failed to prevent the sale and import of illegal pharmaceuticals, controlled substances, precursor chemicals, and counterfeit drug manufacturing equipment into the US from 2016 through 2024[s1–s10]. During this period, approximately 80,000 illegal transactions totaling over $200 million in gross merchandise value were identified on Alibaba’s platforms[s1–s10].
US law enforcement made more than 40 undercover purchases of illegal drugs and counterfeit equipment to support the investigation[s2–s10]. Alibaba admitted responsibility for these violations and entered into a non-prosecution agreement along with AUS Merchant Services, agreeing to strengthen compliance measures and accept accountability for conduct by their employees and officers[s1–s10].
Alibaba agreed to forfeit $200 million and pay $125 million in criminal fines, while AUS Merchant Services was fined $85 million and forfeited $190 million[s5–s7]. An Alibaba spokesperson stated, "This settlement reflects a thorough regulatory process with Alibaba’s full cooperation and our commitment to best-in-class standards of control, policies, and measures against non-compliant product sales" [1].
Internal Alibaba employees had raised concerns about inadequate compliance systems to prevent illegal sales, and some sellers with prior reports of illegal activity remained allowed to sell prohibited products on the platform[s4–s7]. AUS Merchant Services admitted their anti-money laundering program failed to stop merchants using its services for illegal sales[s5–s7,s10].
The investigation was led by the US Department of Justice and the US Attorney’s Office in Rhode Island. Charles C Calenda, First Assistant US Attorney in Rhode Island, said, "The US is committed to holding companies accountable when their platforms are used to facilitate the unlawful sale of illegal pharmaceuticals, related pharmaceutical equipment and other prohibited products in the US" [3]. Brett Shumate, US Assistant Attorney General, added that the resolution showed the department’s commitment to removing illegal and dangerous foreign drugs from digital marketplaces [4].
The settlement comes amid ongoing tensions between Alibaba and the US government, including lawsuits labeling Alibaba a "Chinese military company" and allegations from the AI startup Anthropic about illicit access to AI technology [2, 3]. Following news of the settlement, Alibaba’s shares listed in Hong Kong rose 1.78% on July 2, 2026 [2].
