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Paul J. Cambria, Jr. (NY 15873, admitted pro hac vice)

LIPSITZ GREEN SCIME CAMBRIA LLP

42 Delaware Avenue, Suite 120

Buffalo, New York 14202

Telephone: (716) 849-1333

Facsimile: (716) 855-1580

pcambria@lglaw.com

Erin E. McCampbell (NY 4480166, admitted pro hac vice)

LIPSITZ GREEN SCIME CAMBRIA LLP

42 Delaware Avenue, Suite 120

Buffalo, New York 14202

Telephone: (716) 849-1333

Facsimile: (716) 855-1580

emccampbell@lglaw.com

Attorneys for Defendant Michael Lacey

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

United States of America,

 Plaintiff,

vs.

Michael Lacey, et al., 

 

 Defendants.

NO. CR-18-00422-PHX-SPL (BSB)

DEFENDANT LACEY’S

MOTION FOR RELEASE OF FUNDS 

UNRELATED TO BACKPAGE AND 

REQUEST FOR EXPEDITED RELIEF

(Oral argument requested)

Defendant Michael Lacey, by and through his undersigned attorney, hereby moves for 

an order directing the government to release funds held in three bank accounts (Republic Bank 

accounts ending in 2485, 1897, and 3126). Those funds are not derived from the website 

formerly operated by Backpage.com, LLC and are needed to fund his defense to the charges 

against him. The government’s pretrial seizure of these assets is unsupported and has interfered 

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with Mr. Lacey’s Sixth Amendment right to counsel. This motion is based on the legal reasoning 

and authority set forth in the attached Memorandum of Points and Authorities. 

In light of Mr. Lacey’s mounting financial difficulties, an accelerated hearing of the 

motion is respectfully requested. 

It is expected that excludable delay under 18 U.S.C. § 3161(h)(1)(D) will occur as 

a result of this motion or an order based thereon.

RESPECTFULLY SUBMITTED this 16th day of November, 2018, 

/s/ Paul J. Cambria, Jr. 

LIPSITZ GREEN SCIME CAMBRIA LLP

Attorneys for Defendant Michael Lacey

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MEMORANDUM OF POINTS AND AUTHORITIES

Defendant Michael Lacey respectfully moves this Court for an order requiring the 

government to immediately release the funds held in three of his bank accounts which are 

unrelated to Backpage.com LLC (“Backpage”). Mr. Lacey accumulated substantial wealth 

prior to the creation of Backpage. In its scorched-earth approach to this case, the 

government has seized all of Mr. Lacey’s financial accounts and real estate holdings, 

including considerable assets unrelated to Backpage. Further, the government has done 

everything that it can to evade review of its unlawful seizures on the merits. As a result, 

Mr. Lacey is unable to maintain the properties that the government has seized, unable to 

pay for living expenses, and unable to fund his defense to the instant charges. 

At this time, Mr. Lacey has incurred penalties for unpaid property taxes for some of 

his properties. Further, his counsel of choice has no retainer and has not been paid for their 

work for some time. Without expedited relief from this Court, Mr. Lacey is at risk of 

further penalties from taxing authorities and for loss of his counsel of choice. For these 

reasons, Mr. Lacey respectfully requests that this Court hear the instant motion on an 

accelerated basis and grant the relief requested. 

BACKGROUND

I. Mr. Lacey accumulated substantial wealth prior to existence of Backpage.

Mr. Lacey is an award-winning journalist and the newspapers he oversaw won 

hundreds of awards, including a Pulitzer Prize. Mr. Lacey is the former co-owner of Village 

Voice Media Holdings, LLC (“VVM”), a newspaper conglomerate that, at one time, 

distributed 17 weekly newspapers across the country, including the Phoenix New Times, SF 

Weekly, and New York’s Village Voice. During his tenure at VVM, and long before 

inception of Backpage, Mr. Lacey had accumulated significant wealth. Moreover, in 2012, 

VVM sold its subsidiary, New Times Media, LLC (“NTM”), which owned the newspapers 

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and that sale generated significant wealth for Mr. Lacey that is unrelated to Backpage. 

Further, Mr. Lacey received rental income from rental of the Phoenix New Times Building, 

located on Washington Street in Phoenix, which is unrelated to Backpage.

Mr. Lacey did not receive distributions from the sale of NTM or the rental income 

directly from the purchasers of the newspaper or from the tenants of the Phoenix New Times 

Building. Instead, those payments were made to Cereus Properties LLC (“Cereus”), and Mr. 

Lacey subsequently received payments from Cereus on behalf of its ultimate parent, in which 

Mr. Lacey was a stockholder. Two of these distributions are at issue in this motion. 

II. The government sought and obtained pretrial restraint of the vast majority of 

Mr. Lacey’s assets regardless of their origins.

On March 28, 2018, a grand jury issued an indictment (“Indictment”) against Mr. 

Lacey and his co-defendants in this case. (See Indict., Doc. 3.) The government charged Mr. 

Lacey with conspiracy to facilitate prostitution (18 U.S.C. §§ 371, 1952(a)(3)(A)), facilitation 

of prostitution (18 U.S.C. §§ 1952(a)(3)(A), (b)(1)(i)), conspiracy to commit money 

laundering (18 U.S.C. § 1956(h)), concealment money laundering (18 U.S.C. § 

1956(a)(1)(B)(i)), international promotional money laundering (18 U.S.C. § 1956(a)(2)(A)), 

and transactional money laundering (18 U.S.C. § 1957). (See id. at ¶¶ 157-71.) These charges 

purportedly arise out of Mr. Lacey’s ownership interest in the former ultimate parent of 

Backpage, a web-publishing entity that operated a website that provided third-party users with 

an online forum to post classified advertisements. (See id. at ¶¶ 1-16.) The government’s 

novel theory is that Mr. Lacey should be held criminally liable for the publication of classified 

advertisements posted to Backpage by third-party users, where the ads purportedly related to 

prostitution or sex-trafficking. (See id.) On July 25, 2018, a grand jury sitting in this District 

issued a superseding indictment (“Superseding Indictment”), which included additional 

charges based on the same theory of liability. (See Super. Indict., Doc. 230.) 

Mr. Lacey pleaded not guilty to the crimes charged in both Indictments and has 

mounted a vigorous defense to the government’s case.

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But the litigation among the parties is not limited to this District. Apparently for the 

convenience of a prosecutor, the government pursued the pretrial restraint of the defendants’ 

assets in the Central District of California. Indeed, by the time the original Indictment was 

unsealed, the government had seized the vast majority of Mr. Lacey’s assets (even though he 

must be presumed to be innocent of the crimes charged at this stage and the conduct at issue 

involves presumptively protected First Amendment activities) through civil seizure warrants 

authorized by the Central District of California. Because those seizures violated the First, 

Fourth, Fifth, and Sixth Amendment rights of Mr. Lacey and his co-defendants, they moved 

to vacate the seizure warrants. While that motion was pending, the government filed dozens 

of civil forfeiture actions in the Central District of California seeking pretrial restraint of the 

assets already seized by the civil seizure warrants as well as the majority of Mr. Lacey’s real 

estate holdings. Then, the government obtained a stay of all litigation concerning the pretrial 

restraint of the assets owned by Mr. Lacey and his co-defendants, which Mr. Lacey and his 

co-defendants have appealed to the Ninth Circuit. 

It is unclear when the parties can expect a decision from the Ninth Circuit and that 

uncertainty has rendered the instant motion of vital importance for Mr. Lacey. At this time, 

the government has obtained the pretrial restraint of eleven financial accounts, nine properties, 

three vehicles, and numerous other valuable assets such as works of fine art. The only 

financial account the government has not seized is an IOLTA account of an attorney not 

associated with this case. However, these funds are not available to Mr. Lacey to fund his 

defense to this prosecution because the government has indicated that, if he were to transfer 

any funds, he is at risk for additional money laundering charges.1

 Because Mr. Lacey does 

not have access to any of his funds or real properties, the expedited resolution of this motion 

is critical to his ability to retain counsel of choice.

 1 Mr. Lacey will provide the court with information pertaining to this account in camera, 

if requested. 

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III. The government’s pretrial seizure efforts are troubling and interfere with Mr. 

Lacey’s ability to fund his defense to the charges against him. 

The government’s strangle-hold approach to the pretrial restraint of the defendants’ 

assets is unprecedented and troubling. 

A. The government’s conduct created unnecessary confusion.

The government has pursued seizure on multiple and overlapping fronts. Mr. Lacey’s 

assets have been subjected to pretrial restraint through: (1) the Superseding Indictment’s 

forfeiture allegations; (2) the California civil seizure warrants; (3) the California civil 

forfeiture actions; (4) administrative forfeiture proceedings undertaken by the United States 

Postal Inspection Service; and (5) notices of lis pendens. Each of his assets is subject to three 

or four distinct methods of pretrial restraint. The government’s overlapping and scattered 

efforts at pretrial restraint have caused great confusion and expense to defendants as their 

attorneys seek to challenge the seizures on multiple fronts. 

B. The government avoided transparency for as long as possible.

The government’s efforts at the pretrial restraint of Mr. Lacey’s assets has been 

anything but transparent. Instead, the government has stymied attempts to unfurl its pretrial 

restraint of his assets. For example, shortly after the original Indictment was issued, Mr. 

Lacey’s counsel requested that the government provide the seizure warrants, warrant 

applications, and forfeiture orders issued in connection with the seizure of his assets. Initially, 

the government denied that it had the ability to produce those documents any earlier than the 

end of May, even though the government had been told that each day that Mr. Lacey’s assets 

remained subject to seizure caused undue hardship on him. Unable to wait for the 

government’s end-of-May disclosure, Mr. Lacey moved for the prompt disclosure of those 

documents and for the accelerated hearing of the motion. (See Defs.’ Mot. for Discl., Doc. 

141.) On May 18, 2018, the date the government’s opposition should have been filed with 

this Court, the government finally disclosed the requested documents to Mr. Lacey. Aside 

from mooting this Court’s review of Mr. Lacey’s discovery motion, the government’s midCase 2:18-cr-00422-DJH Document 385 Filed 11/16/18 Page 6 of 17
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May disclosure indicated that its claimed inability to disclose the documents any earlier than 

the end of May rang hollow.

In an effort to maintain their pretrial restraint of defendants’ assets, the government 

has pursued numerous ex parte filings and has filed civil forfeiture actions without serving 

defendants or their counsel. The defendants learned about these actions by searching 

electronic dockets. This process is expensive and could be avoided by service of the 

complaints as they are filed. 

Further, when Mr. Lacey and his co-defendants have sought judicial review of the 

government’s unlawful pretrial restraint, the government has sought orders allowing it to 

evade prompt judicial review of its actions. 

C. The government’s seizures are unlawful. 

As set forth above, the government has evaded any efforts at a review of the propriety 

of the seizures. Mr. Lacey has asserted that none of his assets are traceable to crime because 

his assets were generated from participation in First Amendment activities. Mr. Lacey’s 

position is well-supported because courts have uniformly ruled that adult classified 

advertisements are protected under the First Amendment as is the publishing of such 

advertisements. See, e.g., Backpage.com, LLC v. Dart, 807 F.3d 229, 231 (7th Cir. 2015), 

cert. denied, 137 S.Ct. 46 (2016) (recognizing that the adult advertisements posted to 

Backpage by third-party users constituted protected expression under the First Amendment); 

Doe ex rel. Roe v. Backpage.com, LLC, 104 F. Supp. 3d 149 (D. Mass. 2015), aff’d sub nom., 

Jane Doe No. 1 v. Backpage.com, LLC, 817 F.3d 12 (1st Cir. 2016) (both courts holding that 

Backpage’s actions in publishing third-party ads could not establish that it was a participant 

in a sex trafficking venture under 18 U.S.C. § 1591 or Massachusetts criminal law).

However, separate and apart from the First, Fourth, and Fifth Amendment problems 

with the government’s pretrial restraint of Mr. Lacey’s assets, which is not before this Court 

on this limited motion, the government has refused to acknowledge or account for its pretrial 

restraint of assets that Mr. Lacey has established have no relationship to Backpage and thus, 

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cannot be deemed to be properly subject to seizure even under the government’s novel theory 

of this case. The continued seizure of this class of assets has rendered Mr. Lacey unable to 

maintain his properties, cover his living expenses, and fund his defense to the instant charges, 

which violates his Sixth Amendment rights. That limited issue is before this Court on this 

motion; namely, the government’s brazen claim that it can seize bank accounts that contain 

funds unrelated to Backpage on the basis of a third party’s accidental, unauthorized transfer 

of Backpage-related funds into those accounts, even though Mr. Lacey had no knowledge of 

the transfer, it was contrary to standing instructions with the third party, the third-party is 

willing to speak with the government to explain the circumstances of her mistaken wire 

transfer, and the clerical error was corrected as soon as it was discovered and within twentyfour hours.

1. The government has seized bank accounts containing funds

unrelated to Backpage.

The government has seized all funds held in Mr. Lacey’s Republic Bank accounts 

ending in 2485, 1897, and 3126. The history of those accounts demonstrates that they cannot 

be restrained prior to trial because they do not hold funds traceable to Backpage.

a. Mr. Lacey provided Cereus with standing instructions for 

handling his distributions. 

Cereus had an account into which income generated from the 2012 sale of NTM and

the rental income from the Phoenix New Times Building was deposited. The account ended 

in 4862 (the “4862 Cereus Account”). The 4862 Cereus Account held funds that were 100% 

unrelated to Backpage. Cereus had a separate account into which income generated from 

Backpage was deposited—an account ending in 3873 (the “3873 Cereus Account”). 

Periodically, Cereus made payments from those accounts to Mr. Lacey.

Mr. Lacey authorized Cereus to issue payments (checks or wire transfers) from the 

4862 Cereus Account (which held only money unrelated to Backpage) to his Republic Bank 

Case 2:18-cr-00422-DJH Document 385 Filed 11/16/18 Page 8 of 17
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account ending in 2485. For accounting purposes, Cereus had no authority to wire funds into 

that account from any other Cereus accounts, including its account that held funds generated 

from Backpage, the 3873 Cereus Account. For accounting purposes, distributions from those 

business interests were deposited into other accounts held by Mr. Lacey. 

b. Cereus accidentally violates Mr. Lacey’s standing 

instructions. 

On May 5, 2017, Cereus Account 4862 issued a check payable to Mr. Lacey in the 

amount of $451,205.36. (See May 5, 2017 Check, a true and correct copy of which is attached 

as Ex. A.) On May 23, 2017, Cereus Account 4862 issued a check payable to Mr. Lacey in 

the amount of $225,602.68. (See May 23, 2017 Check, a true and correct copy of which is 

attached as B.) The total of those two checks is $676,808.04. (See Exs. A, B.) These checks 

constituted two of Mr. Lacey’s distributions from the 2012 sale of NTM and rental income 

from the Phoenix New Times Building. Those funds are not traceable to Backpage and are 

untainted regardless of any government allegations. 

When Mr. Lacey received those checks, he voided them because he was unable to visit 

his bank to deposit them. Instead, he contacted Cereus and asked that the funds from the 4862 

Cereus Account (funds unrelated to Backpage) be wired to his Republic Bank account ending 

in 2485 (a bank account that solely held funds unrelated to Backpage). 

At this point, Cereus made a mistake. Michele McSherry, the Office Manager for 

Cereus, transferred $676,808.04 from the 3873 Cereus Account into Mr. Lacey’s Republic 

Bank account ending in 2485 instead of transferring $676,808.04 from the 4862 Cereus 

Account. Ms. McSherry recognized that she had issued payment from the wrong account 

almost immediately and rectified her mistake by transferring $676,808.04 from the 4862 

Cereus Account into the 3873 Cereus Account to replenish the funds mistakenly transferred. 

A contemporaneous bank statement for the 4862 Cereus Account indicates that Ms. McSherry 

fixed the mistake on June 1, 2017. (See June 2017 Statement for 4862 Cereus Account, a true 

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and correct copy of which is attached as Ex. C.) Moreover, the accidental nature of the 

transfer is corroborated by the checks that Cereus had originally issued Mr. Lacey for the 

payment. Those checks were issued from the 4862 Cereus Account, not the 3873 Cereus 

Account. 

c. With no knowledge of the mistaken transfer, Mr. Lacey

transfers money from the Republic Bank account ending in

2485 to accounts ending in 1897 and 3126.

After his arrest, and without knowledge of Ms. McSherry’s clerical error, Mr. Lacey 

transferred funds from the Republic Bank account ending in 2485 to two other bank accounts 

held at Republic Bank (accounts ending in 1897 and 3126). As a result of Ms. McSherry’s 

accidental wire transfer, and Mr. Lacey’s subsequent transfer of funds from the account 

ending in 2485 into his accounts ending in 1897 and 3126 (again, with no knowledge that Ms. 

McSherry had ever transferred funds related to Backpage into his account ending in 2485), 

the government has seized the entire contents of those three accounts. Those three accounts 

hold approximately $1.1 million which Mr. Lacey earned separate and distinct from 

Backpage. The government maintains that all accounts are subject to pretrial restraint because 

Ms. McSherry mistakenly mixed the funds. 

d. Counsel established that the funds are unrelated to

Backpage. 

On May 16, 2018, Mr. Lacey’s counsel contacted the government to seek the 

immediate release of the funds held in Republic Bank accounts ending in 2485, 1897, and 

3126 on the basis that those accounts did not intentionally include Backpage-related funds

and that Backpage-related funds had been deposited into the 2485 account without Mr. 

Lacey’s knowledge or permission. (See May 16, 2018 Email from J. Cook to J. Kucera, a 

true and correct copy of which is attached as Ex. D.) To allay the government’s concern about 

the propriety of those funds, counsel provided the government with a declaration from Ms. 

McSherry documenting her accidental deposit of Backpage-related funds into the account 

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ending in 2485. (See May 14, 2018 Michele McSherry Decl., a true and correct copy of which 

is attached as Ex. E.) Counsel provided the government with copies of the voided checks, 

which demonstrated that those checks were issued from the 4862 Cereus Account. (See Exs. 

A, B.) Counsel provided the government the June 2017 statement for the 4862 Cereus 

Account, which documents Ms. McSherry’s assertion that she rectified the error internally 

between the two Cereus accounts. (See Ex. C.) Additionally, Mr. Cambria informed the 

government that Ms. McSherry was willing to speak with them about the clerical error. 

e. The government refused to investigate the clerical error.

The government refused to conduct an investigation into the error, to interview Ms. 

McSherry or to release the funds held in Republic Bank accounts ending in 2485, 1897, and 

3126, even though these funds represented revenue generated from sources unrelated to 

Backpage and were accidentally mixed with revenue generated from Backpage by a third 

party, contrary to Mr. Lacey’s instructions, and through no act or knowledge of his 

whatsoever. The government’s reason for refusing to meet with Ms. McSherry or to 

investigate the accounts was that the government wanted to avail itself of civil discovery in 

California. However, when it came time to litigate this unlawful seizure in a civil action in 

California, the government moved for a stay of all litigation of its pretrial restraint of these 

accounts, as well as every other seized asset of Mr. Lacey and his co-defendants. 

Consequently, Mr. Lacey remains unable to use the funds held in these three accounts, which 

are unrelated to Backpage, for his defense. The government knows or refuses to learn that 

these funds are not tainted through any act of Mr. Lacey’s. Once again, the government 

simply appears to want to deprive Mr. Lacey of all funds necessary to defend the charges 

against him, including funds unrelated to Backpage.

 

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2. The government has seized other substantial assets unrelated to

Backpage. 

Because Mr. Lacey accumulated substantial assets prior to creation of Backpage, Mr. 

Lacey is in the process of conducting tracing analysis of those other assets. Mr. Lacey 

respectfully reserves the opportunity to supplement the instant motion to include a challenge 

to the pretrial restraint of additional assets.

III. Mr. Lacey is unable to fund his defense.

Mr. Lacey is unable to fund his defense to the instant charges and has been unable to 

do so for some time. Currently, Mr. Lacey owes legal fees to the law firms of Henze Cook 

Murphy PLLC, and Lipsitz Green Scime Cambria LLP for work performed prior to the filing 

of this motion. Due to the complexity of this case, involving constitutional defenses, millions 

of pages of discovery, and serious charges, Mr. Lacey will continue to incur legal fees on a 

daily basis and require a substantial amount of money to adequately defend the instant charges 

with the retained attorneys of his choice. Because Mr. Lacey’s attorneys have no retainer fees 

and are not being paid for their current or prior work, Mr. Lacey is at risk of losing counsel. 

In an effort to meet some of his obligations, Mr. Lacey borrowed money from his 

siblings. His sister supports herself on social security, and his brother is undergoing 

chemotherapy and has significant medical costs. Simply put, his siblings do not have deep 

pockets. The money that they lent Mr. Lacey paid for a portion of his legal fees, but was 

quickly depleted in light of the complexity of this case and the multiple venues the prosecution 

has chosen to seek seizure of his assets. His siblings are unable to loan him any further funds.

Mr. Lacey is unable to maintain his seized properties because he is unable to pay for 

utilities, property taxes, maintenance, and insurance. He owes significant property taxes and 

has already incurred penalties on some of his unpaid property taxes. Several of his properties 

have significant monthly home owners’ association fees and all of his properties have 

monthly utility bills. In addition to these expenses, one of his properties has an orchard, which 

accounts for a substantial portion of the value of the property, which he is unable to maintain. 

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ARGUMENT

It is well-settled that the government has no authority to seize so-called untainted 

assets prior to trial. See Luis v. United States, 578 U.S. ___, 136 S.Ct. 1083, 1094 (2016) 

(“We have found no decision of this Court authorizing unfettered, pretrial forfeiture of the 

defendant’s own ‘innocent’ property—property with no connection to the charged crime.”);

cf. United States v. Ripinksy, 20 F.3d 359, 363 (9th Cir. 1994) (“[S]ubstitute assets are not 

subject to pretrial restraint.”). Instead, “the pretrial restraint of legitimate, untainted assets 

needed to retain counsel of choice violates the Sixth Amendment” because such restraint 

undermines a defendant’s right to counsel of choice. Luis, 136 S.Ct. at 1088. In reaching this 

conclusion, the Court expressed concern for innocent defendants and their ability to prove 

their innocence when their funds had been incorrectly frozen and they were unable to retain 

counsel of choice. See id. at 1095. Further, the Court expressed concern for defendants who 

had been “rendered indigent” by pretrial restraint of their assets who would then “fall back 

upon publicly paid counsel, including overworked and underpaid public defenders.” Id. 

To allay these concerns, the Court indicated that district courts should conduct a 

tracing analysis to determine whether a particular asset is tainted or untainted and could be 

used to pay for counsel. See id. at 1095-96. The Court recognized that district courts “have 

experience separating tainted assets from untainted assets” and such analysis should be 

undertaken to enable a defendant to access and use untainted funds to pay for defense counsel. 

Id. at 1095. Indeed, holding a hearing to make the government demonstrate that an asset is 

subject to pretrial restraint and cannot be used to pay for attorneys’ fees has become routine. 

See Kaley v. United States, 571 U.S. 320, 324 (2014) (recognizing that, “[s]ince Monsanto, 

the lower courts have generally provided a hearing to any indicted defendant seeking to lift 

an asset restraint to pay for a lawyer”).

The government’s continued pretrial restraint of Mr. Lacey’s funds held in Republic 

Bank accounts ending in 2485, 1897, and 3126 does not withstand scrutiny of any kind. The 

funds at issue are derived from the sale of NTM, one of the many sources of income 

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distributed to Mr. Lacey separate and distinct from Backpage. Consequently, the 

government’s continued restraint of Mr. Lacey’s assets derived from the sale of NTM is 

unjustifiable. The government’s continued use of the “nuclear weapon of the law,” see Grupo 

Mexicano de Desarrollo S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 329 (1999) 

(alteration omitted), to deprive Mr. Lacey of funds unrelated to Backpage to pay for defense 

counsel violates his Sixth Amendment right to counsel. See Luis, 136 S.Ct. at 1088-96. 

Here, Mr. Lacey had no involvement with or knowledge of the clerical error that led 

to the accidental deposit of Backpage-related funds into an account that held solely funds 

derived from newspapers and rental properties. In fact, Ms. McSherry’s clerical error was 

contrary to Mr. Lacey’s long-standing instructions to Cereus to limit its wire transfers into his 

Republic Bank account ending in 2485 to revenues generated from the sale of NTM and rent 

from the Phoenix New Times Building. Therefore, Mr. Lacey could not have had the requisite 

specific intent to launder the $676,808.04 at issue in violation of the money laundering 

statutes charged in the Indictment or Superseding Indictment (18 U.S.C. § 1956(a)(1)(B)(i) 

and 18 U.S.C. § 1957(a)) when he had no prior knowledge of the actions Ms. McSherry 

undertook to cause the error and the error was contrary to the instructions he had given 

Cereus. 

As the Ninth Circuit has explained, “[m]oney laundering is a specific intent crime, and 

it requires knowledge on the part of the defendant.” United States v. Gurolla, 333 F.3d 944, 

957 (9th Cir. 2003) (emphasis added). In particular, to establish money laundering under 18 

U.S.C. § 1956(a)(1)(B)(i), the government must establish that a defendant “knowing that the 

property involved in a financial transaction represents the proceeds of some form of unlawful 

activity, conducts or attempts to conduct such a financial transaction which in fact involves 

the proceeds of specified unlawful activity . . . knowing that the transaction is designed in 

whole or in part to conceal or disguise the nature, the location, the source, the ownership, or 

the control of the proceeds of specified unlawful activity.” Id. (emphasis added). Similarly, 

under 18 U.S.C. § 1957, to establish money laundering, the government must prove that a 

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defendant “knowingly engages or attempts to engage in a monetary transaction in criminally 

derived property of a value greater than $10,000 and is derived from specified unlawful 

activity.” Id. (emphasis added). Neither of these statutes permit conviction for money 

laundering when the defendant is oblivious to the purported unlawful financial transaction at 

issue. Further, there are no known cases of money laundering under these charges that result 

in a conviction when a third party engages in a transaction unknown to a defendant and 

contrary to the specific instructions given by the defendant. The government relies on this 

accidental mixing of funds which occurred contrary to Mr. Lacey’s instructions to continue 

to restrain these assets.

Finally, the government’s novel theory for imposing liability on Mr. Lacey for his 

prior involvement with Backpage—which is the government’s basis for restraining the vast 

majority of his assets pre-trial—has never been upheld in a contested proceeding. See, e.g.,

Doe ex rel. Roe, 104 F. Supp. 3d 149 (D. Mass. 2015), aff’d sub nom., Jane Doe No. 1 v. 

Backpage.com, LLC, 817 F.3d 12 (1st Cir. 2016) (both courts holding that Backpage’s actions 

in publishing third-party ads could not establish that it was a participant in a sex trafficking 

venture under 18 U.S.C. § 1591 or Massachusetts criminal law). 

Critically, the government has seized all of the revenue generated by Backpage under 

the theory that all of that revenue represents the proceeds of crime. That bold premise cannot 

be reconciled with rulings from courts holding that there are numerous categories of adult 

advertisements that are protected under the First Amendment and not in any way indicative 

of criminality. See Dart, 807 F.3d at 234 (recognizing that ads posted to Backpage by “strip 

tease artists” or those pertaining to services offered by a “professional dominatrix” do not 

appear to be advertisements for criminal conduct which suggests that “not everything in the 

adult section of Backpage’s website is criminal, violent, or exploitive” (emphasis in original)); 

Dart v. Craigslist, Inc., 665 F. Supp. 2d 961, 968-69 (N.D. Ill. 2009) (explaining that an adult 

services section of Craigslist “is not unlawful in itself nor does it necessarily call for unlawful 

conduct because not all ads posted to that section are for unlawful conduct and some ads, such 

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as ads for erotic dancing were entitled to protection under the First Amendment). Any 

revenue generated by those advertisements is not subject to seizure, even under the 

government’s novel theory of liability. The government has made no showing as to which 

revenue was generated by these lawful advertisements and which revenue was not. As set 

forth in greater detail in other pleadingsfiled with this Court, the government’s blanket seizure 

of all revenue generated by Backpage without a hearing at which the government meets the 

heightened showing necessary to seize proceeds of First Amendment activities prior to 

conviction violates the First Amendment. See Fort Wayne Books, Inc. v. Indiana, 489 U.S. 

46 (1989); see also Simon & Schuster, Inc. v. Members of the New York State Crime Victims 

Bd., 502 U.S. 105, 115 (1991).

CONCLUSION

In light of the foregoing, Mr. Lacey respectfully requests an order directing the 

government to release the funds held in Republic Bank accounts ending in 2485, 1897, and 

3126. These funds, of approximately $1.1 million, are wholly unrelated to Backpage. The 

government has refused to release these funds or to investigate their origins, which would 

enable Mr. Lacey to maintain his properties and to fund his defense to the instant charges. 

Without immediate access to these funds, Mr. Lacey will be unable to mount a defense with 

private counsel of his choice in violation of his Due Process and Sixth Amendment rights. 

Due to the tenuous financial position in which the government has placed Mr. Lacey, Mr. 

Lacey respectfully requests the accelerated hearing of this motion.

RESPECTFULLY SUBMITTED this 16th day of November, 2018, 

/s/ Paul J. Cambria, Jr. 

LIPSITZ GREEN SCIME CAMBRIA LLP

Attorneys for Defendant Michael Lacey

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On November 16, 2018, a PDF version

of this document was filed with

Clerk of the Court using the CM/ECF

System for filing and for Transmittal

Of a Notice of Electronic Filing to the

Following CM/ECF registrants:

Kevin Rapp, kevin.rapp@usdoj.gov

Reginald Jones, reginald.jones4@usdoj.gov 

Peter Kozinets, peter.kozinets@usdoj.gov

John Kucera, john.kucera@usdoj.gov 

Margaret Perlmeter, margaret.perlmeter@usdoj.gov 

Patrick Reid, Patrick.Reid@usdoj.gov 

Andrew Stone, andrew.stone@usdoj.gov

Amanda Wick, Amanda.Wick@usdoj.gov

Case 2:18-cr-00422-DJH Document 385 Filed 11/16/18 Page 17 of 17