Backpage Founders’ Prostitution, Money Laundering Trial Date Set

PHOENIX, AZ — An Aug. 17 trial has been scheduled in Phoenix for the founders of Backpage.com, a website that was almost synonymous with sex ads, on charges they knowingly published the ads and then laundered money from them.

Backpage is Dutch-owned company incorporated in Delaware and based in Texas, but it kept its servers and bank accounts in Arizona.

Founders Michael Lacey and James Larkin, who worked alongside each other for years at the Phoenix New Times and built a large national chain of alternative weeklies, have pleaded not guilty to charges they facilitated prostitution and laundered money through the site.

Prosecutors allege the site has brought in $500 million revenue for thinly veiled prostitution-related ads and repeatedly ignored warnings that some of the ads involved the sex trafficking for children, since its 2004 founding.

Backpage.com was shut down in the 2018 enforcement action by the Federal Bureau of Investigation, the U.S. Postal Inspection Service and the Internal Revenue Service Criminal Investigation Division.

Attorneys general in Arizona, California and Texas, as well as Justice Department's Child Exploitation and Obscenity Section were also involved in the investigation.

Six others were charged, including former CEO and Backpage co-founder Carl Ferrer, who pleaded guilty to charges of conspiracy to facilitate prostitution and money laundering in state courts in Texas and California and a federal court in Arizona. He has agreed to testify against Lacey and Larkin.

In his plea agreement, Ferrer admitted Backpage advertisers were encouraged to word their ad copy in a way that it didn't overtly appear sex was for sale. He wrote that he “conspired with other Backpage principals … to find ways to knowingly facilitate the state-law prostitution crimes being committed by Backpage’s customers.”

He also admitted to creating a “moderation” process to filter and remove terms and pictures that indicated prostitution.

“Such editing did not,” Ferrer wrote in his plea agreement, “of course, change the essential nature of the illegal service being offered in the ad — it was merely intended to create a veneer of deniability for Backpage.”

He said the “editing practices were only one component of an overall, companywide culture and policy of concealing and refusing to officially acknowledge the true nature of the services being offered in Backpage’s ‘escort’ and ‘adult’ ads.”

Dan Hyer, the sales and marketing director for Backpage, also pleaded guilty to conspiring to facilitate prostitution, and admitted in court that he participated in the scheme to corner the market on prostitution ads by offering free ads to sex workers.

The Associated Press contributed reporting.