Criminal charges in Backpage case: Founders, 5 others face 93 counts

09 Apr 2018

The U.S. Department of Justice today released a 61-page indictment including 93 criminal counts against two founders and five other employees of Backpage.com, the international general-classified site accused of facilitating prostitution.

The federal government seized Backpage.com late Friday, calling it “an enforcement action” by several agencies including the Federal Bureau of Investigation, the U.S. Attorney’s Office for Arizona, the Department of Justice Child Exploitation and Obscenity Section and others.

U.S. government Friday seized Backpage.com

Notice posted on Backpage.com

Those named in the indictment:

— Michael Lacey, founder of Backpage

— James Larkin, a cofounder

— Scott Spear, EVP of a Backpage parent company and one-time part-owner

— John “Jed” Brunst, CFO of a Backpage parent company and one-time part owner

— Dan Hyer, the company’s sales and marketing director

— Andrew Padilla, operations manager

— Joye Vaught, assistant operations manager

The charges included conspiracy to facilitate prostitution; facilitating prostitution; conspiracy to commit money laundering, and several other money laundering charges.

Curiously, Backpage.com CEO Carl Ferrer was not directly named or charged in the indictment, although it includes numerous references to a “C.F.” — presumably Ferrer. Ferrer and two cofounders of Backpage were charged with various criminal violations in state court in California late last year; those charges are still pending.

“Although Backpage has sought to create the perception that it diligently attempts to prevent the publication [of ads involving sex trafficking of children], the reality is that Backpage has allowed such ads to be published while declining — for financial reasons — to take necessary steps to address the problem,” the indictment states.

“Backpage has also contributed to the proliferation of ads featuring the prostitution of children in other ways,” it said. “Virtually every dollar flowing into Backpage’s coffers represents the proceeds of illegal activity.”

It accused the company of using cryptocurrencies, domestic and international wire transfers and other money laundering techniques, including the establishment of a shell corporation in the Netherlands, to hide the proceeds of its advertising sales.

(You can download the indictment here; the Justice Department news release is here.)

The Justice Department noted that it had already seized the Backpage domain; it listed dozens of related domains that it seeks to seize, along with 10 properties in California, Arizona, Texas and Illinois. The indictment listed 25 bank accounts from which it intends to seize funds.

As of this afternoon, there had been no public comment from any of the defendants or the company itself. Typically an indictment is followed by an arraignment; there was no immediate word when the defendants would be arraigned, and whether they would be granted bond or bail.

— Peter M. Zollman

 

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Peter M. Zollman

Peter M. Zollman brings more than 35 years of media experience to his role as founding principal of the AIM Group / Classified Intelligence Report. He has worked with a wide range of media companies, dot-coms, technology providers and start-ups to develop and expand successful interactive-media services. He is based in Altamonte Springs, Fla., near Orlando.