The Justice Department announced Thursday that Backpage’s co-founder and CEO, Carl Ferrer, has pleaded guilty to conspiracy to facilitate prostitution using a facility in interstate or foreign commerce and to engage in money laundering.
Additionally, several Backpage-related corporate entities, including Backpage.com LLC, have entered guilty pleas to conspiracy to engage in money laundering.
Last week, the classifieds website was seized and shut down by the FBI.
The FBI confirmed that agents also raided the Sedona home of Michael Lacey, the founder of Backpage.com.
Backpage.com has been under investigation for years for claims that the site facilitates sex trafficking on their adult ads page.
The site allowed users to post ads for ‘escorts’ and investigators say many of the ads are actually for underage girls.
The FBI seized the website because it was allegedly being used to facilitate crime. The FBI has done this before with other sex trafficking websites and online pharmacies.
There are 17 victims named in the documents who are both adults and children who say they were forced into sex trafficking.
“For far too long, Backpage.com existed as the dominant marketplace for illicit commercial sex, a place where sex traffickers frequently advertised children and adults alike,” said Attorney General Jeff Sessions. “But this illegality stops right now. Last Friday, the Department of Justice seized Backpage, and it can no longer be used by criminals to promote and facilitate human trafficking.”
“Backpage has earned hundreds of millions of dollars from facilitating prostitution and sex trafficking, placing profits over the well-being and safety of the many thousands of women and children who were victimized by its practices,” said First Assistant U.S. Attorney Elizabeth A. Strange. “It is appropriate that Backpage is now facing criminal charges in Arizona, where the company was founded, and I applaud the tremendous efforts of the agents who contributed to last Friday’s enforcement action and who assisted in obtaining the indictment in this case.”
According to his plea agreement, Ferrer admitted that he had long been aware that the great majority of Backpage’s “escort” and “adult” advertisements are, in fact, advertisements for prostitution services, which are not protected by the First Amendment and which are illegal in 49 states and in much of Nevada.
Ferrer further admitted that he conspired with other Backpage principals to find ways to knowingly facilitate the state-law prostitution crimes being committed by Backpage’s customers. For example, he worked with his co-conspirators to create “moderation” processes through which Backpage would remove terms and pictures that were particularly indicative of prostitution and then publish a revised version of the ad.
Ferrer admitted that 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” ads.
In his plea agreement, Ferrer also admitted that he conspired with other Backpage principals to engage in various money laundering offenses.
According to the agreement, since 2004, Backpage has earned hundreds of millions of dollars in revenue from publishing “escort” and “adult” ads. Over time, many banks, credit card companies, and other financial institutions refused to do business with Backpage due to the illegal nature of its business.
In response, Ferrer admitted that he worked with his co-conspirators to find ways to fool credit card companies into believing that Backpage-associated charges were being incurred on different websites, to route Backpage-related payments and proceeds through bank accounts held in the name of seemingly unconnected entities, and to use cryptocurrency-processing companies for similar purposes.
Ferrer’s plea agreement also requires him to take all steps within his power to immediately shut down the Backpage website, including providing technical assistance to the United States to effectuate the shutdown, and to take all steps within his power to forfeit to the United States all corporate assets and other property owned or controlled by various Backpage-related entities.
Today, @POTUS signed into law our bipartisan #SESTA. This bill will enable Backpage and other websites to be held accountable for knowingly facilitating human trafficking, and allow victims of these horrific crimes to seek the justice they deserve. https://t.co/l3Lidlc7vg pic.twitter.com/t82QDrI4aw
— John McCain (@SenJohnMcCain) April 11, 2018
The plea agreement provides that, if Ferrer fails to comply with either of these requirements, the plea agreement shall be null and void and the United States may bring additional charges against Ferrer. Ferrer’s plea agreement, and the corporate plea agreements, also consent to the forfeiture of certain assets and items of property, including various domain names associated with the Backpage website.
The seven defendants charged in the 93-count indictment were all arrested on Friday, April 6.
They are Michael Lacey, 69, of Paradise Valley, Arizona; James Larkin, 68, of Paradise Valley, Arizona; Scott Spear, 67, of Scottsdale, Arizona; John E. “Jed” Brunst, 66, of Phoenix, Arizona; Daniel Hyer, 49, of Dallas, Texas; Andrew Padilla, 45, of Plano, Texas; and Jaala Joye Vaught, 37, of Addison, Texas.
On April 6, Vaught had her initial court appearance before U.S. Magistrate Judge Eileen Willett of the District of Arizona and was released from custody pending trial. Lacey, who also had his initial court appearance on April 6 before Judge Willett, subsequently had a detention hearing on April 11 before U.S. Magistrate Judge Bridget S. Bade of the District of Arizona and was ordered to temporarily remain in custody until his continued hearing on Friday, April 13.
On April 9, Larkin, Spear, and Brunst had their initial court appearances before Judge Bade. Larkin has since been ordered to temporarily remain in custody until a continued detention hearing on Monday, April 16, and Spear and Brunst were released from custody pending trial.
Also, on April 9, Hyer had his initial court appearance before U.S. Magistrate Judge David L. Horan in the Northern District of Texas and was released from custody pending trial, and Padilla had his initial court appearance before U.S. Magistrate Judge Christine A. Nowak in the Eastern District of Texas and was released from custody pending trial.