Backpage.com Founder Michael Lacey Sentenced to 5 Years

Michael Lacey, the founder of the profitable classified ad website Backpage.com, was sentenced Wednesday to five years in prison and fined $3 million for a single count of money laundering in a sprawling case involving allegations of a years-long scheme to promote and profit from prostitution through classified ads.

A jury convicted Lacey, 76, of one count of international money laundering concealment last year but failed to find on 84 other counts of facilitating prostitution and money laundering. U.S. District Judge Diane Humetewa later acquitted Lacey of dozens of the charges due to insufficient evidence, but he still faces about 30 counts of facilitating prostitution and money laundering.

Authorities say the site generated $500 million in prostitution revenue from its inception in 2004 until it was shut down by the government in 2018.

Lacey’s attorneys say their client was focused on running the alternative newspaper chain and had no involvement in the day-to-day operations of Backpage.

However, during Wednesday’s hearing, Humetewa told Lacey he was aware of the allegations against Backpage but did nothing.

“In the face of all this, you stood strong,” the judge said. “You did nothing.”

Two other Backpage executives, Chief Financial Officer John Brunst and Executive Vice President Scott Spear, were also convicted last year and were sentenced to 10 years in prison on Wednesday.

Prosecutors said the three defendants acted out of greed, promoted prostitution by masquerading as a legitimate, covert business and misled anti-trafficking organizations and law enforcement officials about the true nature of Backpage’s business model.

Prosecutors said Lacey used cryptocurrency and transferred funds to offshore bank accounts to launder money generated from selling ads on the site after banks raised concerns it was being used for illegal purposes.

Authorities say Backpage employees identified prostitutes through Google searches, then called them and offered them free ads. The site is also accused of having a business arrangement in which it placed ads on another site that allowed customers to post reviews about their experiences with prostitutes.

The site’s marketing director has already pleaded guilty to conspiracy to facilitate prostitution, admitting that he participated in a scheme to offer free advertising to prostitutes in order to attract their clients. In addition, the company’s CEO when the government shut down the site, Carl Ferrer, has pleaded guilty in a separate federal case to conspiracy in Arizona and to money laundering charges in California.

Two other Backpage employees were acquitted by a jury during the same 2023 trial in which Lacey, Brunst and Spear were convicted of some charges.

At trial, Backpage defendants were not allowed to point to a 2013 memo from federal prosecutors who investigated the site and said at the time they found no evidence of a pattern of recklessness with minors or admissions by key participants that the site was used for prostitution.

In the memo, prosecutors said witnesses testified that Backpage made significant efforts to prevent criminal behavior on its site and coordinated such efforts with law enforcement. The document was written five years before Lacey, Larkin and other former Backpage operators were charged in the Arizona case.