Alibaba to Pay $600M Settling Illegal Drug Sale Claims

Alibaba will pay $600 million to settle U.S. allegations that its e-commerce platforms enabled the sale and import of illegal pharmaceuticals, controlled substances and pill-making equipment over nearly a decade.

Scope of the Violations

Under the non-prosecution agreement with the Justice Department, Alibaba acknowledged that between January 2016 and December 2024 it failed to block roughly 80,000 product transactions tied to unlawful imports, violations that fall under the Federal Food, Drug, and Cosmetic Act along with other federal statutes. That figure spans nearly nine years, which puts the average at just under 9,000 flagged transactions annually, a volume that regulators say points to systemic gaps rather than isolated lapses.

The core allegation centers on AUS Merchant Services, Alibaba's U.S. based payment processor, which prosecutors say did not stop merchants from using Alibaba.com and AliExpress.com to move illegal pharmaceuticals, regulated chemicals and drug making equipment into the country.

Internal Warnings and Enforcement Workarounds

Court filings referenced in the settlement indicate that Alibaba's own employees had flagged the company's compliance controls as inadequate well before the case was resolved. Those internal warnings apparently went unheeded long enough for merchants to exploit a workaround: directing buyers from Alibaba's messaging tools to third party platforms to finalize illegal sales, a tactic that would have kept transactions further outside the reach of the company's monitoring systems.

How Investigators Built the Case

The scale of the enforcement effort is notable. Agents from the FDA, FDIC and IRS Criminal Investigation, among other agencies, ran more than 40 undercover purchases of pharmaceuticals and pill press equipment that are illegal to import into the U.S. That multi agency approach, spanning consumer safety, financial and tax enforcement arms, suggests the government viewed this less as a narrow customs issue and more as a cross cutting compliance failure touching payments, product safety and interstate commerce.

IRS Criminal Investigation Chief Jarod Koopman framed the outcome as evidence of the agency's financial tracing work, saying the resolution