Backpage Co-Founder Secures Bail as Appeal Process Begins

A panel from the Ninth Circuit has granted bail to Michael Lacey, former owner of Backpage.com, as he appeals a five-year prison sentence. Lacey, who was convicted in August for money laundering linked to classified ads for prostitution, was originally denied release by a federal judge along with two other executives. However, the Ninth Circuit’s three-judge panel reversed this decision for Lacey, citing minimal flight risk and substantial legal questions regarding his conviction.

The crux of Lacey’s appeal centers on the interpretation of his actions related to a reported $16.5 million transfer to a Hungarian bank. Prosecutors allege this transfer was an effort to hide profits from Backpage’s illicit activities. Lacey counters that he fully disclosed the transfer to the IRS, including the source of the funds, and argues that filing the necessary tax forms precludes any claim of concealment.

According to Lacey, the transaction in question involved loan repayments made by Carl Ferrer, who purchased Backpage from him in 2015. He asserts that the government failed to link these earnings to specific illegal prostitution ads, which the jury did not find him guilty of facilitating.

In his motion for bail, Lacey raised a provocative question about whether informing the federal government about international fund transfers absolves one from concealment allegations. His assertion highlights a broader legal debate surrounding the transparency of financial transactions and their implications under federal law.

During the trial, prosecutors maintained that the financial maneuvers executed through a shell corporation were crafted to mask the illegal origins of the money, pointing to Lacey’s emails indicating a desire to shield these funds from government scrutiny. U.S. District Judge Diane Humetewa characterized the transfer to Hungary as part of a series of unusual transactions designed to obscure the connection to Backpage’s revenues.

The Ninth Circuit ultimately agreed that Lacey’s appeal presents a valid legal issue, prompting the court to grant him bond. Lacey, who had voluntarily reported to federal prison on September 11, is scheduled to appear in Phoenix federal court on December 2, where conditions of his release—including a $1,000,000 bond—will be established.

Overall, Lacey faced 86 counts tied to conspiracy, money laundering, and facilitating prostitution. While he was acquitted of one count of money laundering, the jury deadlocked on numerous other charges, including nearly all related to prostitution. Some counts linked to ads placed after Lacey sold the company were later dismissed by Humetewa.

Additionally, Lacey’s former colleagues, Scott Spear and John Brunst, faced their own legal challenges with varying degrees of conviction and acquittal on several charges. However, the Ninth Circuit denied their requests for bail based on a lack of new substantial legal arguments.

Backpage was founded in 2004 as a classified ad competitor to Craigslist, primarily generating revenue from its adult services section, which came under scrutiny for facilitating prostitution, including the exploitation of minors.

Throughout the prolonged trial, Lacey’s defense claimed that Backpage took meaningful steps to combat sex trafficking, while prosecutors argued that company executives merely danced around illegal conduct to evade prosecution.