Owners of Backpage website, earning over $500 million from prostitution jailed

Admin I Friday, August 30, 2024

 

PHOENIX – A federal judge in Phoenix today sentenced the three owners of Backpage, a prostitution website, for offenses arising from their promotion of and associated money laundering.

Michael Lacey, 76, of Paradise Valley, Arizona, was sentenced to five years in prison and three years of supervised release; Scott Spear, 73, of Phoenix, was sentenced to 10 years in prison and three years of supervised release; and John “Jed” Brunst, 72, of Phoenix, was sentenced to 10 years in prison and three years of supervised release.

The Court also ordered that all defendants turn themselves in to the U.S. Marshals Service by noon on Sept. 11.

“The defendants and their conspirators obtained more than $500 million from operating an online forum that facilitated the sexual exploitation of countless victims,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division.

“The defendants thought they could hide their illicit proceeds by laundering the funds through shell companies in foreign countries. But they were wrong.

“Their sentences should serve as a stark reminder that the Criminal Division and its law enforcement partners are committed to protecting victims and following the money to unmask those who exploit human beings for financial gain.”

“These convictions hold accountable three C-Suite executives who controlled an enterprise and its illicit profits,” said U.S. Attorney Gary Restaino for the District of Arizona.

“The courage of the victims of Backpage’s criminal activities is vindicated by the sentences imposed by the Court, to include the loss of liberty for each defendant as well as the additional large fine imposed on defendant Lacey, which will inure to the benefit of the Crime Victims Fund and crime victims everywhere.”

According to court documents and evidence presented at trial, Lacey, Spear, and Brunst owned Backpage. From September 2010 through its seizure by the United States in April 2018, Backpage was the internet’s leading forum for prostitution ads.

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 November 2023, a federal jury in Phoenix convicted Lacey of one count of international concealment money laundering; Spear of conspiracy to violate the Travel Act, 17 counts of violating the Travel Act, money laundering conspiracy, and 10 counts of concealment money laundering; and Brunst of conspiracy to violate the Travel Act, money laundering conspiracy, 10 counts of concealment money laundering, and five counts of international promotional money laundering.

Today’s sentences follow prior convictions of Backpage leadership and corporate entities:

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.

In April 2018, several Backpage-related corporate entities, including Backpage LLC, pleaded guilty to conspiracy to engage in money laundering.

Co-conspirator James Larkin, 73, died on July 31, 2023, before trial began.

Principal Deputy 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 Carissa Messick of the IRS Criminal Investigation (CI) Phoenix Field Office, Acting Assistant Director Jodi Cohen of the FBI’s Criminal Investigative Division, Special Agent in Charge Jose A. Perez of the FBI Phoenix Division, and Acting Inspector in Charge Matthew Shields of the U.S. Postal Inspection Service (USPIS) Los Angeles Division made the announcement.

Assistant U.S. Attorneys Kevin Rapp, Margaret Perlmeter, 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, Office of the California Attorney General, and Office of the Texas Attorney General. Assistant U.S. Attorney Joseph Bozdech for the District of Arizona is handling the asset forfeiture aspects of the case.