For Sex Industry, Bitcoin Steps In Where Credit Cards Fear To Tread

Across the country, law enforcement is cracking down on sex trafficking of minors by going after online escort ads.

Five years ago, Craigslist was pressured to shut down its adult-services forum. The new target is Backpage.com — Visa and MasterCard stopped processing transactions with Backpage this summer.

Some in the sex industry are getting around that by using the virtual currency bitcoin. That's the latest adaptation by an industry used to getting creative to avoid detection.

After making more than 800 arrests off Backpage since 2009, Cook County Illinois Sheriff Tom Dart called a news conference to announce a victory this summer.

"We want to commend both Visa and MasterCard for their civic responsibility, for so quickly acting when we talked to them. American Express has already done that. They've now been narrowed down to where there's very little options for people who want to work with that website," Dart said.

A version of this has played out before. The main site for escort ads used to be Craigslist. But under pressure from activists, Craigslist shut down its adult services forum.

Many of those ads then migrated to Backpage.

For human rights lawyer Malika Saada Saar, who led the Craigslist action, that nimble pivot was a disappointment.

"I am no longer willing to play a game of whack-a-mole with these websites. Until we start arresting buyers for statutory rape and putting them on the sex offender registry, Craigslist, Backpage or the next mainstream website will continue to be popular and used in a widespread way," Saada Saar says.

Backpage, owned by a Dutch company, is fighting back. It's suing Sheriff Dart and making its ads free.

It won't provide revenue figures and an attorney for the company declined to comment.

Backpage's free ads spurred a blizzard of listings, but free isn't always free. Advertisers who want to make their ads more prominent pay a premium.

That's where where bitcoin comes in. It's a cyber currency that's sold peer to peer. There's no central bank, but there's an online ledger where transactions are recorded.

Some bitcoin fans hope Backpage's credit card obstacle might become bitcoin's boon.

Ray Youssef is the CEO of Paxful Inc. in New York, a website that sells bitcoin. He says "the Backpage Effect" drove in a whole new clientele.

"I was getting calls from people and they were just calling me up begging me to help them and I said, 'OK, just log on, create an account,' and they were like, 'Account where?' They didn't even know what our website was. People were just passing around our number on social media," Youssef says.

He says these customers, many of them unbanked and not tech-savvy, found bitcoin clunky.

Tutorials sprang up to help this kind of customer on the Web, and in-person — gatherings like one near San Francisco publicized by the Bay Area Chapter of the Sex Workers Outreach Project.

In an apartment in a newly gentrified industrial area, a recent bitcoin workshop for Backpage ads gets underway.

It feels like a neighborhood meeting, with snacks and soft drinks. A tax attorney arrives with his PowerPoint.

He shows the group how to trade the virtual currency on their cellphones, and he points out they can also use bitcoin to reserve hotel rooms on Expedia.

Those attending this session view the easy movement of virtual currency, and the difficulty of tracing it, as appealing. But for those trying to combat the sex trade, strangling the money flow to an industry this adaptable remains a challenge.

Sasha Aslanian is a correspondent for American RadioWorks, the national documentary unit of American Public Media.