The CEO and cofounder of pleaded guilty to conspiracy to facilitate prostitution and agreed to help the U.S. government shut the site down, the Department of Justice announced late Thursday.

Carl Ferrer, who helped launch the site in 2004, acknowledged in an “information” document filed by the government that he knew the site was carrying ads for prostitution. He also pleaded guilty to a money-laundering charge.

Separately but in conjunction with Ferrer’s plea, LLC and several related entities entered guilty pleas to money-laundering charges. “It is the parties’ intention that the defendant will cease to exist or operate following its entry of a guilty plea in this matter,” the document stated. Forfeiture of assets, including cash and domain names, were among the penalties included in the agreement.

Ferrer’s plea, which was signed last week on the day before the federal government seized Backpage, was sealed until Thursday night. Ferrer, 57, of Frisco, Texas, agreed to forfeit personal assets to the government, but was allowed to keep his home and a retirement account as part of the plea. He also agreed to plead guilty to related charges in California and Texas.

“During its 14 years of existence, [Backpage] has derived the great majority of its revenue from fees charged in return for publishing advertisements for ‘adult’ and ‘escort’ services,” Ferrer admitted in the plea document. “I have long been aware that the great majority of these advertisements are, in fact, advertisements for prostitution services … .”

Ferrer said the company earned “hundreds of millions of dollars” by publishing the ads. In the statement, he admitted that “moderation” techniques he and Backpage developed were designed to “create a veneer of deniability for Backpage.

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

Ferrer could face five years in prison and a maximum fine of $250,000, plus forfeiture of assets he received as a result of his Backpage actions. Typically, after a defendant pleads guilty and agrees to cooperate with the government, he or she receives a reduced sentence. In the agreement, the government said it would recommend reduced penalties to the court handling the case if Ferrer cooperated fully.

The other two cofounders of Backpage, Michael Lacey and Jim Larkin, along with five employees of the company, are still facing charges filed by the Department of Justice after the site was seized and shut down. The government filed a 61-page indictment April 6 against the defendants, charging them with 93 criminal counts. Several of the defendants were held in jail pending hearings; others were released pending trial.

— Peter M. Zollman

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