Backpage CEO gets probation for conspiracy charge

PHOENIX (CN) — Two former Backpage.com executives turned government witnesses were sentenced Tuesday on conspiracy charges relating to the laundering of money earned via prostitution advertisements.

Carl Ferrer, co-founder and former CEO of the Craigslist competitor, received three years of probation and was ordered to pay $40,000 in restitution to eight of the thousands of victims trafficked through prostitution ads on the site from 2004 to its federal seizure in 2018.

Ferrer pleaded guilty to conspiracy in 2018 when he and co-founders Michael Lacey and James Larkin were arrested along with a few employees, allowing the government to seize more than $200 million in company assets and cooperating in exchange for a lighter sentence.

“We would not have an understanding of the nature and circumstances of the offenses but for Mr. Ferrer,” federal prosecutor Kevin Rapp told U.S. District Judge Diane Humetewa in a Phoenix courtroom. “He is almost entirely responsible for us having that $200 million victims’ fund.”

Rapp spent more than two weeks of trial in 2023 questioning Ferrer about the daily operations of Backpage, which made millions off its “adult” classifieds category. Ferrer, who became CEO in 2015 after purchasing the company from Lacey and Larkin, said he and others in charge knew the “female escort” ads sold on the site were actually advertising prostitution, in many cases of human trafficking victims and minors.

“Some of these individuals were confined in hotel rooms, often given drugs, often posed in provocative ways and posted on the site,” Humetewa, a Barack Obama appointee, told Ferrer Tuesday. “Many of the victims, I learned through the impact statements, lost their lives.”

Ferrer said in the 2023 trial that Backpage collaborated with pimps to craft advertisements that fly under the radar of moderation and maintained a business relationship with a prostitution review website called The Erotic Review. He also told the court that Backpage created shell corporations overseas to launder money after credit card companies stopped doing business with the company.

By the end of trial, the jury found Lacey guilty of one count of money laundering but returned no verdict for the conspiracy and prostitution counts. He now faces up to five years in prison and a third trial to retry the hung counts. His sentence is currently pending appeal.

Ferrer made little objection to his sentencing memorandum on Tuesday, accepting full responsibility for his role in the company.

“What the company did was wrong, and what I did was wrong,” Ferrer said. “I’m sorry. I will carry this regret and shame with me for the rest of my life.”

Ferrer’s attorney Jonathan Baum talked Humetewa down from a recommended five years of probation, arguing that Ferrer was a victim of “brainwashing” from Lacey and Larkin, assuring him his actions were protected by the First Amendment.

“He was surrounded by a stream of misrepresentations and lies,” Baum said.

Former sales director Dan Hyer, who pleaded guilty to the same count as Ferrer, was even luckier in garnering Humetewa’s sympathy.

In the 2023 trial, the jury acquitted former operations manager Andrew Padilla and former assistant operations manager Joye Vaught. Their attorneys argued that they were simply employees following directions and had nothing to do with any larger conspiracy or effort to promote prostitution.

“Because you were not a decision maker, I am reminded that sometimes you were taking guidance from Mr. Padilla,” Humetewa said. “If the jury didn’t find enough to convict Mr. Padilla or Ms. Vaught, I do have to take that into consideration.”

Like Ferrer, Hyer made no excuses.

“My actions at Backpage affected the lives of people I’ll never know,” he said. “It’s hard to look myself in the mirror. I will continue to try and work on the side of good rather than evil for the rest of my life.”

“I feel, Mr. Hyer, your remorse to be sincere,” Humetewa replied. She ordered no restitution payments and gave him no prison time, allowing him to walk free from the courthouse.

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