Feds Agree to $215 Million Settlement Agreement Related to Assets of Prostitution Ad Service Backpage.Com

            LOS ANGELES 

The Justice Department has filed a settlement agreement in the civil forfeiture case involving Backpage.com, a now-defunct website known for hosting prostitution advertisements, including those involving minors, officials stated.

Under the agreement, $215 million in assets linked to Backpage’s profits, previously seized by the government, will be forfeited to the United States.

The forfeited assets include cash, cryptocurrency, and a parcel of real estate located in San Francisco, according to authorities.

These assets will be made available through a remission process that compensates victims of the crimes associated with Backpage.

Notably, this forfeiture accounts for over 80% of the total value of the property that was seized or restrained in this case.

            For most of its 14-year existence, Backpage dominated the online market for illegal sex work advertising in the United States.

While Backpage offered many categories of advertisements, in most years, more than 90% of Backpage’s revenue and activity occurred in the adult-related ad sections.

Backpage monetized these advertisements by allowing a variety of pay-for options such as posting ads across multiple geographic areas and increased ad promotion. The company’s CEO eventually admitted that most of the website’s adult ads were for prostitution.

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

Several Backpage owners and executives also have been convicted in this matter, including Michael Lacey, 76, of Paradise Valley, Arizona, who was sentenced to five years in prison; Scott Spear, 74, of Phoenix, was sentenced to 10 years in prison; and John “Jed” Brunst, 72, of Phoenix, was sentenced to 10 years in prison. Lacey is free on bail pending appeal.

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

The conspirators knowingly promoted prostitution via various marketing strategies. For example, they 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.

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

            The U.S. Postal Inspection Service, the FBI, and IRS Criminal Investigation investigated this matter.

            Assistant U.S. Attorney Jonathan S. Galatzan of the Asset Forfeiture and Recovery Section is prosecuting this case.