Special Delivery. Alibaba never touched a pill. The Justice Department’s bill still came to six hundred million dollars.
Rhode Island is the smallest state in the union, and the whole of it makes up a single federal judicial district, run from a courthouse in Providence. During one federal investigation, it was also among the country’s best-supplied. Packages kept arriving: pill presses, the kind of machine that can stamp out thousands of tablets an hour; chemicals from government watch lists; medicines that no American pharmacy would hand over without a prescription. The customers were federal agents, shopping on Alibaba.com and AliExpress the way anyone else would, with a search box and a checkout page. They placed more than forty orders. Every one of them showed up.
On July 1st, the Justice Department announced what the deliveries had been for. Alibaba Group, the Chinese e-commerce giant, and AUS Merchant Services, its American payment processor (formerly Alipay US, and now part of the Ant group), agreed to pay a combined six hundred million dollars under two non-prosecution agreements: the largest monetary settlement, prosecutors noted, in the history of the district. Alibaba called the outcome “a mutually satisfactory resolution” and promised stricter controls on what third-party sellers ship into the United States; AUS said it was pleased to put the matter behind it and pointed to continuous upgrades to its compliance program.
The money is not the most interesting part. Neither company sold a single tablet. Neither imported anything. The liability attached instead to the plumbing: the search box, the chat window, the payment rails. For anyone who operates a marketplace, or moves other people’s money, the agreements read less like a punishment than like a map, a precise survey of where responsibility now lives in online commerce.
Start with the scale. Alibaba admitted that between January, 2016, and December, 2024, roughly eighty thousand sales moved through its platforms to American buyers in violation of the Federal Food, Drug, and Cosmetic Act and related import laws: controlled substances, listed precursor chemicals, prescription drugs, active pharmaceutical ingredients, and the presses and die molds used to counterfeit pills. The goods were worth more than two hundred million dollars. Against the backdrop of the platform itself, the numbers almost vanish; Alibaba.com carried more than two hundred million listings at any given moment and handled tens of billions of transactions a year. The illegal trade amounted to a fraction of a fraction of one per cent. As it turned out, a sufficient fraction.
The bill was divided with actuarial neatness. Alibaba pays a criminal penalty of a hundred and twenty-five million dollars and forfeits two hundred million; AUS pays eighty-five million and forfeits a hundred and ninety. Both companies accepted responsibility for the acts of their officers and employees, pledged further coöperation, and received credit for helping the investigation along. Neither received credit for coming forward, because neither did.
What makes the case instructive is that Alibaba had, on paper, done everything right. Its Rules Center, a kind of constitution for the marketplace, expressly banned drugs that failed to meet F.D.A. requirements, banned pill presses, banned the whole catalogue of merchandise the agents in Providence kept receiving, and reserved the company’s right to throw violators off the platform. The government’s complaint was not with the rulebook but with the distance between the rulebook and the loading dock. Alibaba’s own employees warned that the filters were porous, and the company conceded, in the agreed statement of facts, that it was “not sufficiently reactive or proactive” in response.
The second admission is the more haunting one. The platform gave buyers and sellers a private, built-in messenger, and some sellers used it the way a certain kind of shopkeeper uses the curtain at the back of the store. They arranged shipments designed to slip past customs. They passed buyers contact details for encrypted apps, where the rest of the deal could happen out of view. Alibaba had the technical ability to moderate these chats, and sometimes did, but as a rule it punished sellers only when contraband appeared in a public listing. The store window was under surveillance. The trade had moved to the stockroom.
Then there is the money. Alibaba charged its sellers membership fees, marketing fees, advertising fees, shipping fees, transaction fees; it profited, modestly but really, from the very merchants who were breaking the rules. And here lies the most instructive arithmetic in the whole settlement. The two hundred million dollars Alibaba forfeits is the gross value of the goods the third-party sellers moved, not the slice the platform took in commissions. The government did not ask for Alibaba’s cut. It took the river. The signal to the industry could hardly be clearer: a platform that draws fees from a stream of transactions, and tolerates poison in the stream, will one day be asked to hand over the stream itself.
The payments side of the case is, if anything, a purer specimen. AUS belongs to Ant, the operator of Alipay, which makes it a corporate cousin of Alibaba rather than a subsidiary: affiliated, but formally distinct. Its mechanics were classic collection-account work. An American buyer paid in dollars, by card or by wire; the wires landed in one of two AUS accounts at American banks. The checkout page told wire customers to include a “beneficiary account number,” a routable code that matched each deposit to a particular overseas seller, along with the order number. The money then moved offshore, to an affiliate that settled with the merchant far from any American teller.
As a money-services business, AUS sat squarely under the Bank Secrecy Act, which requires a risk-based anti-money-laundering program and a suspicious-activity report for anything questionable from two thousand dollars up, filed within thirty days. Against those obligations, the agreed facts describe two failures, one of data and one of nerve. The data failure came in 2022, when AUS stopped leaning on its overseas affiliates and migrated transaction monitoring to its own system, but never fully piped in the wire records from its American bank accounts. The result was a watchtower with a blind spot: the system could not always see that an order was funded from a high-risk jurisdiction, or that several different payers were splitting a single invoice, which are about the first two red flags anyone learns in the trade. A monitoring system severed from its data sources does not stop working. It becomes a ritual.
The failure of nerve was quieter. When AUS identified merchants selling prohibited goods, it did not, in a number of cases, cut them off. It reported them to Alibaba, its business partner, and moved on. At least one merchant went right on selling to American customers after being investigated and reported. Compliance conducted by forwarding messages to a partner is not a control. It is correspondence.
One sequence in the statement of facts deserves to be laminated and taped above every compliance officer’s desk. In October, 2022, AUS opened a case on a seller identified only as Merchant A, confirmed sales of prohibited goods to American buyers, and filed a regulatory report. In January, 2023, Merchant A sold another prohibited product to an American customer. In July, 2023, six months after the transaction, an employee reviewed the order, noted that the product was banned and available only by prescription, and concluded that the activity fell below the reporting threshold. The system worked at every step. It simply worked toward the archive rather than toward a block, and on a six-month cycle, in a business that runs on a daily one.
It is tempting to read “non-prosecution agreement” as a euphemism for getting away with it. The documents suggest otherwise. An N.P.A. is a contract with the government: no indictment, no conviction, and, in exchange, a package of obligations that can outlast and outweigh any fine a judge would have imposed. Its foundation is the signed statement of facts. The companies have waived the usual protections, including the federal evidence rule that normally keeps settlement admissions out of court, so that if either one breaches the deal, any future prosecutor begins with a confession already in hand.
The government’s leverage came from one of the oldest and strangest corners of American criminal law. A misdemeanor under the food-and-drug act requires no proof of intent; under a doctrine the Supreme Court built in United States v. Dotterweich, in 1943, and United States v. Park, in 1975, it is enough that a person stood in a “responsible relation” to the violation. Add a civil-forfeiture statute keyed to smuggling, which let the government reach the gross value of other people’s sales, and the negotiating table tilts before anyone sits down.
The architecture of the agreements is textbook. Three years of obligations, extendable by up to one more; the statute of limitations tolled throughout, plus six months for good measure. AUS must send the government quarterly lists of its suspicious-activity filings; Alibaba must report, within thirty days, any evidence or allegation that its users violated federal drug or import law. Neither company may publicly contradict the admitted facts, on pain of reviving the prosecution, though each gets ten business days to repudiate an errant executive’s remark. Press releases about the settlement must be run past the government first. If either company sells or restructures the relevant business, the buyer must inherit the obligations, and a deal that omits them is void. And at the end of the term the companies’ most senior officers, chief executives and compliance chiefs among them, must personally certify performance, on paper that federal law treats as a sworn statement. Lie on that form and the exposure is no longer corporate.
Equally telling is what the agreements omit: there is no independent compliance monitor, the outside overseer that used to be standard equipment in resolutions of this size. Instead, Alibaba must open, within ninety days, a fast-track “Law Enforcement Green Channel” for American subpoenas and warrants; AUS must stand up a dedicated mailbox; both submit to self-certification and to the government’s audit powers. This is precisely the settlement one would design after reading the memo that Matthew R. Galeotti, then the head of the Justice Department’s Criminal Division, issued on May 12th, 2025, under the title “Focus, Fairness, and Efficiency in the Fight Against White-Collar Crime.” The memo lists ten priority areas, trade and customs fraud and the narcotics supply chain prominent among them, favors negotiated resolutions capped at about three years, and treats monitors as a last resort. Holding the Alibaba deal up against it is like holding a cake up against its recipe.
Buried in the attachments is a detail that says something about how these endings are actually made. An extract from Alibaba’s board minutes records that the company’s independent directors, meeting at Times Square in Hong Kong and by video at nine-thirty-five on the morning of March 18th, unanimously approved a proposed settlement defined as a misdemeanor characterization and three hundred and twenty-five million dollars. The signatures came on June 29th; the announcement, on July 1st. The press release was the last act of the negotiation, not the first.
None of this arrived out of a clear sky. In January, 2024, eBay paid fifty-nine million dollars to resolve civil allegations over pill presses and encapsulating machines sold on its site, admitting nothing; the department called it the first settlement of its kind with an e-commerce company, and a U.S. Attorney observed that the site’s record-keeping lapses had allowed people to “set up pill factories in their homes.” Two and a half years later, the government came back to the same problem with a criminal instrument, full admissions, and forfeiture. The escalation has a logic, and the logic has a name. A pill press fitted with a die mold that mimics a legitimate tablet is a complete production line for counterfeits, and counterfeit pills laced with fentanyl are the engine of the deadliest overdose wave in American history.
Washington has been closing the adjacent doors, too. The de-minimis exemption, which for years let packages worth under eight hundred dollars enter the country duty-free and lightly inspected, was revoked for Chinese and Hong Kong shipments on May 2nd, 2025, suspended for every country by executive order that August, and then repealed outright by statute, effective July 1st, 2027. The small-parcel channel is being closed by law. The platform channel has just been closed by settlement.
And the same company is fighting a parallel campaign on a second continent. In Brussels, AliExpress is designated a “very large online platform” under the European Union’s Digital Services Act, a status reserved for services with more than forty-five million European users and carrying the heaviest duties in the statute. The European Commission opened formal proceedings in March, 2024, and on June 18th, 2025, it did two things at once. It accepted, and made legally binding, a package of commitments from the platform: tighter policing of “hidden links” that smuggle illegal goods behind innocuous listings, a cleaner notice-and-action system, a searchable advertising repository, data access for researchers, and an independent monitoring trustee reporting back to the Commission. The same day, it issued preliminary findings that AliExpress had violated the act’s core risk provisions, Articles 34 and 35, by failing to assess and rein in the spread of illegal products. If those findings hold, the exposure runs to six per cent of worldwide turnover. In March, 2026, when the company’s representatives appeared before the European Parliament’s internal-market committee, Commission officials cited figures showing that even the best observed compliance rate for products linked to the platform still meant that fifty-three per cent failed European rules. “It sounds great what you’re doing, but reality is not great,” Christel Schaldemose, a Danish member, told them. Two continents, two procedures, one thesis: a marketplace answers for the systemic risk of its own floor, and not merely for what it posts itself.
What the American agreements and the European proceedings share can be put in a sentence. Whoever takes a fee from the stream of transactions, and holds the data to see what the stream is carrying, will be treated as a gatekeeper; and ignorance stops being a defense at the moment it becomes the product of a decision not to look. Tysen Duva, who now heads the Justice Department’s Criminal Division, offered the official version: “Without active compliance, criminals use e-commerce sites to carry on and profit from illicit activity.” The unofficial version was sitting in Providence all along, in a stack of more than forty parcels, each one delivered on time, and each one, as it turned out, a receipt.
This account is drawn from the two non-prosecution agreements of June 29th, 2026, and their attachments, the Justice Department’s announcement of July 1st, the European Commission’s actions of June 18th, 2025, and contemporaneous reporting; the record is current as of July 7, 2026.
Robert Nogacki – licensed legal counsel (radca prawny, WA-9026), Founder of Kancelaria Prawna Skarbiec.
There are lawyers who practice law. And there are those who deal with problems for which the law has no ready answer. For over twenty years, Kancelaria Skarbiec has worked at the intersection of tax law, corporate structures, and the deeply human reluctance to give the state more than the state is owed. We advise entrepreneurs from over a dozen countries – from those on the Forbes list to those whose bank account was just seized by the tax authority and who do not know what to do tomorrow morning.
One of the most frequently cited experts on tax law in Polish media – he writes for Rzeczpospolita, Dziennik Gazeta Prawna, and Parkiet not because it looks good on a résumé, but because certain things cannot be explained in a court filing and someone needs to say them out loud. Author of AI Decoding Satoshi Nakamoto: Artificial Intelligence on the Trail of Bitcoin’s Creator. Co-author of the award-winning book Bezpieczeństwo współczesnej firmy (Security of a Modern Company).
Kancelaria Skarbiec holds top positions in the tax law firm rankings of Dziennik Gazeta Prawna. Four-time winner of the European Medal, recipient of the title International Tax Planning Law Firm of the Year in Poland.
He specializes in tax disputes with fiscal authorities, international tax planning, crypto-asset regulation, and asset protection. Since 2006, he has led the WGI case – one of the longest-running criminal proceedings in the history of the Polish financial market – because there are things you do not leave half-done, even if they take two decades. He believes the law is too serious to be treated only seriously – and that the best legal advice is the kind that ensures the client never has to stand before a court.
