Backpage.com founder freed on $1M bond in case over sex ads

Backpage.com operators, from left, Michael Lacey, James Larkin and Carl Ferrer in a composite of undated photos provided by police. (Sacramento County Sheriff's Office via AP)

PHOENIX -- A founder of the classified advertising site Backpage.com was released from custody Friday after spending a week in jail on charges alleging that he knowingly published ads for sexual services and money laundering.

Michael Lacey walked out of the federal courthouse in Phoenix after posting a $1 million bond and declined to speak with reporters about the charges against him.

His release came a day after authorities revealed that Backpage.com CEO Carl Ferrer pleaded guilty to a federal conspiracy charge in Arizona and state money laundering charges in California.

In addition, the company pleaded guilty to human trafficking in Texas and a federal money laundering conspiracy charge in Arizona. Ferrer has agreed to testify against others.

U.S. Magistrate Judge Bridget Bade ordered that Lacey wear an electronic monitoring device, provide an accounting of his finances and refrain from exerting any control over the website.

Lacey wore a black and white striped jail suit during a bail hearing Friday. His only comments came when he told the judge that he understood the conditions of his release.

"I do, your honour," Lacey said.

Lacey, Backpage.com co-founder James Larkin and five employees were arrested last week on federal charges. Larkin remains in jail and has a bail hearing Monday.

The federal indictment in Arizona alleges Backpage.com ignored warnings to stop running advertisements promoting prostitution, sometimes involving children, because the site had brought in $500 million in prostitution-related revenues since its inception in 2004.

Authorities say Backpage.com portrays itself as trying to prevent such ads, but investigators determined the site's operators have declined to confront the problem. Employees are accused of helping customers edit their ads to say within legal limits while still encouraging commercial sex.

The indictment alleges Backpage.com started to launder money earned from ad sales after banks raised concerns that they were being used for illegal purposes.

Lacey, Larkin and four of the five employees charged in the federal case in Arizona have pleaded not guilty.