The U.S. Department of Justice said Wednesday that Alibaba Group Holding Ltd.
A non-prosecution agreement allows a company to avoid criminal prosecution if it meets specific conditions, including financial penalties, compliance reforms and continued cooperation with investigators.
According to the DOJ, merchants using Alibaba.com and AliExpress carried out roughly 80,000 unlawful sales involving imports into the U.S. between January 2016 and December 2024. The sales included illegal pharmaceuticals, controlled substances, regulated chemicals and pharmaceutical counterfeiting equipment, violating the Federal Food, Drug and Cosmetic Act and other federal laws. The combined gross merchandise value exceeded $200 million.
Federal investigators conducted more than 40 undercover purchases of illegal drugs and pill-making equipment during the probe, according to the DOJ.
Compliance Failures
The DOJ said Alibaba's internal controls were not strong enough to prevent prohibited sellers from using its platforms. It also said some merchants used Alibaba's private messaging tools and third-party encrypted apps to facilitate unlawful transactions.
AUS, formerly known as Alipay U.S., also admitted weaknesses in its anti-money-laundering compliance program. Court documents said the company failed to fully incorporate certain wire-transfer data into its transaction monitoring systems, causing it to miss some high-risk transactions. In at least one case, a merchant continued selling prohibited goods after being flagged.
Assistant Attorney General Brett A. Shumate said companies operating online marketplaces must implement safeguards to stop bad actors from exploiting their platforms.
Under the settlement, Alibaba will pay a $125 million criminal penalty and forfeit $200 million, while AUS will pay an $85 million criminal penalty and forfeit $190 million. Both companies also agreed to strengthen compliance controls and continue cooperating with federal investigators.
Broader Scrutiny
Alibaba said it cooperated fully with the investigation and called the settlement a mutually satisfactory resolution, according to Fox Business.
The settlement comes as Alibaba faces broader scrutiny in the U.S. Last month, AI startup Anthropic accused the company of using thousands of fraudulent accounts to harvest nearly 28.8 million conversations from its Claude AI models, according to Reuters. Alibaba did not publicly respond to that allegation.
BABA Price Action
At the time of publication, Alibaba shares were down 1.58% at $96.44 in pre-market trading on Thursday, after closing 2.09% higher at $97.99 in the previous session.
The stock has traded between a 52-week high of $186.20 and a 52-week low of $88.65.
Over the past 12 months, BABA shares are down approximately 13.62%.
Benzinga Edge Stock Rankings indicate negative price trends across the short, medium and long term.
