Backpage Principals Convicted of $500M Prostitution Promotion Scheme

Backpage Principals Convicted of $500M Prostitution Promotion Scheme

A federal jury in Phoenix convicted three former owners of Backpage.

com yesterday of multiple counts of promoting prostitution business enterprises and multiple counts of money laundering, including conspiracy offenses.

According to court documents and evidence presented at trial, Michael Lacey, 75, of Paradise Valley, Arizona; Scott Spear, 72, of Phoenix; and John “Jed” Brunst, 71, of Phoenix, owned Backpage.

com, which was the internet’s leading forum for prostitution ads from September 2010, when Craigslist shut down its prostitution ad section, until April 2018, when the United States seized Backpage.

com.

Evidence at trial showed that the conspirators knowingly promoted prostitution via various marketing strategies.

For example, the conspirators engaged in a reciprocal link program with an independent web forum that permitted “johns” to post reviews of prostitution acts with specific women.

Additionally, the conspirators used an automated filter and human moderators to remove terms known to indicate sex-for-money, while still allowing the ads to be posted.

Through this attempt to sanitize the ads, the conspirators sought “plausible deniability” for what the conspirators knew to be ads promoting prostitution.

Over the life of the conspiracy, the conspirators earned more than $500 million.

In an effort to preserve the money earned, Lacey, Spear, and Brunst laundered the money through numerous shell companies they created in multiple foreign countries.

In March 2018, a grand jury in Phoenix charged the conspirators in an indictment with conspiracy to facilitate prostitution using a facility in interstate or foreign commerce, facilitating prostitution using a facility in interstate or foreign commerce, conspiracy to commit money laundering, concealment money laundering, international promotional money laundering, and transactional money laundering.

In April 2018, Carl Ferrer, 57, of Frisco, Texas, who was Backpage’s co-founder and CEO, pleaded guilty to conspiracy to facilitate prostitution using a facility in interstate or foreign commerce and to engage in money laundering.

 In August 2018, Dan Hyer, 54, of Dallas, who was Backpage’s Sales & Marketing Director, pleaded guilty to conspiracy to facilitate prostitution using a facility in interstate or foreign commerce.

Additionally, several Backpage-related corporate entities, including Backpage.

com LLC, pleaded guilty to conspiracy to engage in money laundering.

 
Co-conspirator James Larkin, 73, died on July 31 before trial began.

Lacey, Spear, and Brunst each face a maximum penalty of 20 years in prison on each money laundering count.

A federal district court judge will determine any sentence after considering the U.

S.

Sentencing Guidelines and other statutory factors.

Acting Assistant Attorney General Nicole M.

Argentieri of the Justice Department’s Criminal Division, U.

S.

Attorney Gary M.

Restaino for the District of Arizona, Special Agent in Charge Albert Childress of the IRS Criminal Investigation (IRS-CI) Phoenix Field Office, Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division, Special Agent in Charge Akil Davis of the FBI Phoenix Division, and Inspector in Charge Carroll Harris of the U.

S.

Postal Inspection Service (USPIS) Los Angeles Division made the announcement.

IRS-CI, the FBI Phoenix Field Office, and USPIS investigated the case.

The Los Angeles Joint Regional Intelligence Center provided substantial assistance.

Assistant U.

S.

Attorneys Kevin Rapp, Margaret Perlmeter, Andy Stone, and Peter Kozinets for the District of Arizona and Trial Attorney Austin M.

Berry of the Criminal Division’s Child Exploitation and Obscenity Section are prosecuting the case, with significant assistance from the U.

S.

Attorney’s Office for the Central District of California, the Office of the California Attorney General, and the Office of the Texas Attorney General.

Assistant U.

S.

Attorney Daniel Boyle for the Central District of California is handling the asset forfeiture aspects of the case, with assistance from Assistant U.

S.

Attorney Joseph Bozdech for the District of Arizona.

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