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Backpage founders accused of promoting prostitution, laundering money

Backpage founders charged in alleged scheme
Posted at 1:11 PM, Apr 09, 2018
and last updated 2018-04-09 21:40:21-04

Seven people, including some with Phoenix connections, have been indicted in federal court on prostitution crimes relating to the operation of the website. 

The 93-count grand jury indictment was unsealed Monday afternoon. It alleges that earned more than $500 million from the human trafficking industry and that operators sent the proceeds to foreign countries. 

Federal prosecutors say they’ve identified at least 17 victims of trafficking, including a 14-year-old. One victim was allegedly murdered by a customer.

Two of the defendants, James Larkin and Michael Lacey, are also the former publishers of the “Phoenix New Times”, and they still maintain homes in Arizona. Two other defendants, Scott Spear and John "Jed" Brunst, live in the Valley.

The FBI confirms agents raided Lacey's home in Sedona on Friday. ABC15 also witnessed the FBI agents at both Lacey's and Larkin's homes in Paradise Valley.

The U.S. government electronically shut down Friday, in connection with the case.

The website offered a variety of goods and services for sale. However, critics said the vast majority of ads posted were thinly disguised offers for prostitution. 

RELATED: Sex trafficking survivors, advocates, weigh in on closure operators are accused of promoting prostitution and, using Bitcoin to launder the proceeds to other countries including Iceland, Hungary, and the Netherlands.

The indictment said many ads published on depicted children who were sex trafficking victims.

While the site maintains it diligently tries to prevent prostitution ads, it still allows them and has declined to take steps to confront the problem, the indictment said.

The seven people charged in the federal indictment are accused of trying to sanitize ads by removing photos and words that were indicative of prostitution and then publishing a revised version of the notices.

A former employee tells ABC15 he was editing erotic services ads a decade ago, when the business was in its infancy. The man, currently the boyfriend of an ABC15 employee, asked not to be identified because of the nature of his former job.

"It was sort of like a running joke that this doesn't seem right - the 'roses' instead the 'dollars,'" the man said. "Obviously, it's dollars, but it doesn't technically say 'dollar,' so as far as anyone is concerned, it wasn't illegal.'"

The man said he when he was working at in 2008 and 2009, he was about 21 years old, and he said he was not fully aware of the human sex trafficking industry.

"If what they're being accused of is true, I'm glad to see them going down," he said.  "At the time, it never seemed malicious or like such a criminal activity, or obviously I wouldn't of been there."