Backpage’s Crypto Saga May Result in Sanctions for the Site’s Lawyers Backpage’s Crypto Saga May Result in Sanctions for the Site’s Lawyers

Cook County Sheriff Tom Dart has been working to take down classified ads website Backpage for years. In his latest move against the now defunct platform, Dart asked a federal judge to consider ordering sanctions against the lawyers who represented Backpage in light of new information about its use of cryptocurrencies.

First, some background on Backpage. The site, originally launched in 2004 by Village Voice Media (then called New Times Media), was conceived of as a digitized classified section. One of its sections advertised adult services, which was suspended in early 2017 because people suspected sex traffickers of regularly using the site to sell nonconsenting adults and minors. (Prostitution is also criminalized in most of the U.S.) There have been multiple accounts of girls sold by sex traffickers through Backpage going back to the early 2010s.

The shutdown of Backpage’s adult section prompted a contentious debate. On one side, sex workers and their advocates said the shutdown put sex workers in peril, forcing them to meet clients out on the streets—a much more dangerous method, they said, than being able to finds clients from behind their computer screens. “There’s no research that says removing advertising sites reduces trafficking,” Maxine Doogan, president of the Erotic Service Provider Legal, Educational and Research Project, told The Guardian in 2017. Their opponents cited the numerous cases of sex traffickers making rampant use of the platform, saying shutting down Backpage would take away one of the most popular, easy-to-use places for predators to do business.

Dart is in the latter group. In 2015, he asked major credit card companies like American Express, Visa, and Mastercard stop letting people use their services to post adult advertisements on Backpage. His effort was a success. In a Huffington Post article about Backpage’s new payment limitations, the author wrote, “With American Express, Visa and Mastercard all agreeing to stop processing payments for Backpage, anyone who wants to place an adult services ad on the site will have to pay with the cryptocurrency bitcoin.”

These were still early days for bitcoin awareness, but according to recent updates, it looks like Backpage has been making use of the cryptocurrency for years—allegedly to launder money.

Earlier this month, Backpage’s founders, James Larkin and Michael Lacey, along with several of the site’s former employees, were indicted on federal charges for money laundering and facilitating prostitution after CEO Carl Ferrer pleaded guilty last year. The indictment says Backpage earned $500 million from activities related to prostitution during its existence, which its operators laundered through a variety of methods, including wiring it to foreign accounts and trading it in for various cryptocurrencies.

Meanwhile, Backpage had sued Dart and the Cook County Sheriff’s Office for asking credit card companies to stop doing business with the site, saying this infringed on its first amendment rights. The lawsuit was thrown out last year, after Ferrer’s guilty plea. Just a few weeks ago, a federal judge filed a motion to grant the Cook County Sheriff’s Office $250,000 because Backpage’s CEO had knowingly made false claims in its original lawsuit against the sheriff’s department.

One of those false claims, as shown in a legal document in which Dart motioned for sanctions against Backpage and its lawyers, was that “Sheriff Dart’s actions . . . have cut off nearly all revenue to (leaving only Bitcoin as a means of payment, which accounts for a small percentage of purchases on the website).” Now compare that to a statement from Ferrer’s guilty plea.

Image from legal document provided by Cook County Sheriff's Office

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The court granted Dart’s sanctions against Backpage but not against its legal counsel. Now, Dart is trying to make sure Backpage’s lawyers, from the firm Davis Wright Tremaine, pay for allegedly knowing more than they let on about their client’s use of crypto and other means to launder money.

“The 93-count federal indictment of former Backpage CEO Carl Ferrer and his subsequent guilty plea, made it clear that Backpage was utilizing cryptocurrency to continue a flow of profits obtained through prostitution and sex trafficking ads,” the Cook County Sheriff’s Office wrote to us. “The money laundering charges that made up part of the indictment, stated that Backpage had used methods such as checks through the mail, holding money in accounts unrelated to the company, wiring money to foreign countries and utilizing cryptocurrency. The indictment stated that Backpage converted customer payments in and out of cryptocurrency to evade law enforcement.”

This post has been updated with a statement from the Cook County Sheriff’s Office.