Backpage.com founder Michael Lacey sentenced to 5 years in prison and $3 million fine for money laundering

PHOENIX (AP) — Michael Lacey, founder of the lucrative classifieds website Backpage.com, was sentenced Wednesday to five years in prison and fined $3 million for a single Money laundering Indictment in a comprehensive case involving allegations that prostitution was promoted for years through classified ads and that profit was made from it.

A jury found Lacey, 76, guilty last year on a single count of international money laundering, but could not agree on 84 other counts of promoting prostitution and money laundering. U.S. District Judge Diane Humetewa later acquitted Lacey of dozens of charges due to insufficient evidence, but he still faces about 30 charges of promoting prostitution and money laundering.

According to authorities, the website generated $500 million in revenue from prostitution between its founding in 2004 and 2012. It was closed by the government in 2018.

Lacey's lawyers say their client was focused on running an alternative newspaper chain and was not involved in Backpage's day-to-day operations.

But Humetewa told Lacey during the sentencing on Wednesday that he was aware of the allegations against Backpage and did nothing.

“Despite all this, you have held firm,” Humetewa said. “You have done nothing.”

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

The judge ordered Lacey and the two executives to report to the U.S. Marshals Service in two weeks to begin serving their sentences.

Prosecutors said the three defendants were motivated by greed, promoted prostitution under the guise of a legitimate classified advertising business, and misled anti-trafficking organizations and law enforcement officials about the true nature of Backpage's business model.

Yvonne Ambrose, whose 16-year-old daughter Desiree Robinson was kidnapped via Backpage in Chicago in 2016 and killed by a man who responded to an online sex ad, told the judge on Tuesday about the pain she feels over her daughter's death.

“I suffer every day from the loss of my baby,” Ambrose said.

Prosecutors alleged that Lacey used cryptocurrencies and transferred money to foreign bank accounts to launder revenue from the site's ad sales after banks raised suspicions that the money would be misused for illegal purposes.

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

The site's marketing director has already pleaded guilty to conspiracy to promote prostitution, admitting that he participated in a scheme that placed free ads to prostitutes in order to recruit them as customers. In addition, when the government shut down the site, the company's CEO said: Carl Ferrer pleaded guilty to a separate federal conspiracy case in Arizona and state money laundering charges in California.

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

During the trial, the Backpage defendants were barred from accessing a 2013 memo from federal prosecutors investigating the website, which said they found no evidence of a pattern of recklessness toward minors, nor did key participants admit that the website was being used for prostitution.

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

A Government Accountability Office report released in June noted that the FBI's ability to identify victims and sex traffickers declined significantly after the government seized Backpage because of law enforcement's familiarity with the site and Backpage's generally responsiveness to requests for information.

Prosecutors said the site's moderation efforts were aimed at concealing the true nature of the ads. Although Lacey and Larkin sold their shares in Backpage in 2015, prosecutors said the two founders retained control of the site.