Court orders Backpage.com to give up LLC formations in Delaware

A court has ordered four limited liability companies associated with the former sex-trafficking website Backpage.com to give up their Delaware certificates of formation.

The Delaware Court of Chancery consent judgment issued Tuesday comes more than six months after former state Attorney General Matt Denn petitioned to revoke the website’s incorporation status.

The company’s former CEO Carl Ferrer pleaded guilty in 2018 to money laundering and conspiracy to facilitate prostitution. The federal government also shut down Backpage.com the same year.

However, Delaware’s LLC laws allowed Backpage.com to renew its license, despite the federal indictment accusing Ferrer and six other executives of facilitating prostitution, money laundering, and criminal conspiracy.

Delaware law allows the true owners of LLCs to remain shielded and serves as a major incentive for companies to incorporate in the First State.

Denn’s complaint was made possible by a change in the law, which allows the AG’s Office to petition for the cancelation of a company’s formation if it abused or misused its LLC privileges.

“In this first use of that power with regard to LLCs, DOJ and the Court have set a precedent for using that power to address a company whose formation was largely used to promote criminal activity,” said Delaware’s new Attorney General Kathy Jennings in a statement.

The certificates of formation for Backpage.com, LLC; Website Technologies, LLC; Posting Solutions, LLC; and Amstel River Holdings, LLC will be cancelled 31 days after federal criminal charges are resolved, due to a request from the U.S. Attorney for the District of Arizona, which is prosecuting Backpage and the other three LLCs and their principals.