‘Backpage.com’ Accused of Money Laundering & Aiding Prostitution with Crypto

The FBI seized and shut down the site on Friday, April 6th.

Controversial personal advertising website ‘Backpage’ was seized by the US Department of Justice on Friday, April 6. The site had been the target of legal for scrutiny for years, as it had gained a reputation as an online hub for illegal sex work.

The reasons for the DOJ’s actions were laid out yesterday in a 93-count federal indictment, which included accusations of “facilitating prostitution using a facility in interstate or foreign commerce” and various kinds of money laundering. Much of the “interstate or foreign commerce” in question for the facilitation of sex work and money laundering? Bitcoin and other cryptocurrencies.

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Payment processors Visa and Mastercard halted the use of their services on the site in 2015 for what they called “moral, social, and legal reasons.” As a result, the use of Bitcoin rose significantly on the site, and sex workers who used Backpage began using crypto en masse in a movement that came to be known as “The Backpage Effect.”

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Defendants Used “Virtual Currencies…and the Anonymity of the Internet” to Cover Tracks

The defendants in the case are co-founders Michael Lacey and James Larkin, whom IRS Criminal Investigation Chief John D. Fort named as the “masterminds” of the operation. FBI agents recently raided Lacey’s home; in 2016, both men were arrested and charged with conspiracy to commit pimping.

Fort explained that the two mens’ “egregious financial crimes such as money laundering” were committed “at the expense of women and children.” He continued to say that the men used “virtual currencies… and the anonymity of the Internet” to hide their actions.

The indictment reads: “by 2008, if not earlier, the Backpage defendants were aware that the overwhelming majority of the website’s ‘adult’ ads involved prostitution. Nevertheless, the Backpage defendants made a financial decision to continue displaying those ads.”

TechCrunch reported that Craigslist made the decision to remove its own personal advertisements platform after the recent passage of the Fight Online Sex Trafficking Act (FOSTA). Backpage reportedly made the decision against removing ads soliciting sex to remain ahead of its competition with Craigslist and other personal ad platforms.

A Newsweek report presented the other side of the story: the simple fact that sex workers who relied on the site as their main source of income have been hit hard by the shutdown.

A sex worker known as Mandie told the publication that she was “devastated and terrified” at the shutdown, “because people are going to die. I know that sounds blunt and maybe a little alarmist, but it’s not. The most marginalized of us are going to die. Trans people, people of color, poorer people are going to die.”

Nevertheless, the US government sees things differently. Chief Postal Inspector Guy Cottrell commented that “by laundering the illegal gains of an enterprise, Backpage perpetuated the exploitation of victims and continued to finance their business.”

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