Michael Lacey, founder of the lucrative classified ads site Backpage.com, was sentenced Wednesday to five years in prison and a $3 million fine on one count of money laundering in a wide-ranging case that included an alleged years-long scheme to facilitate and profit from prostitution through classified ads.
A jury last year convicted Lacy, 76, of concealing international money laundering but deadlocked on 84 counts of soliciting prostitution and money laundering. U.S. District Judge Diane Humetewa later acquitted Lacy of dozens of charges, citing insufficient evidence, but Lacy still faces about 30 counts of soliciting prostitution and money laundering.
Authorities say the site generated $500 million in prostitution-related revenue from its launch in 2004 until it was shut down by the government in 2018.
Lacey's lawyers say their client was focused on running the alternative newspaper chain and was not involved in Backpage's day-to-day operations.
But during Wednesday's sentencing, Humetewa told Lacey he was aware of the allegations against Backpage but did nothing.
“In the face of all this you have held firm,” the judge said. “You have done nothing.”
Two other Backpage executives, Chief Financial Officer John Brunst and Executive Vice President Scott Speer, were also convicted last year and each received a 10-year prison sentence on Wednesday.
Prosecutors said the three defendants were motivated by greed, promoted prostitution under the guise of a legitimate confidential business, and misled anti-human trafficking organizations and law enforcement officials about the true nature of Backpage's business model.
Prosecutors said Lacey used cryptocurrency to launder revenue from selling ads on the site by transferring the money to overseas bank accounts after raising concerns the bank was being used for illegal purposes.
Authorities said Backpage employees would use Google searches to find prostitutes and then call them to offer them free ads. The site also allegedly had a business arrangement to post the ads on a separate site where customers could review their experiences with the prostitutes.
The site's marketing director has already pleaded guilty to conspiracy to promote prostitution, admitting that he was involved in a scheme to provide prostitutes with free ads in order to attract customers. Additionally, the company's CEO at the time the government shut down the site said: Karl Ferrer pleads guilty He is accused of a separate federal conspiracy case in Arizona and a state money laundering offense in California.
In the same 2023 trial in which Lacey, Brunst and Speer were found guilty of several charges, two other Backpage employees were also acquitted by a jury.
At trial, Backpage defendants were barred from bringing up a 2013 memo by federal prosecutors who investigated the site, but said at the time they found no evidence of a pattern of reckless conduct with minors or that key players acknowledged that the site was being used for prostitution.
Prosecutors said in the memo that witnesses testified that Backpage went to great lengths to prevent criminal activity on the site and coordinated its efforts with law enforcement. The document was written five years before Lacey, Larkin and other former Backpage operators were indicted in the Arizona case.
