Thirty-four women who claim they are victims of Pornhub filed a federal racketeering lawsuit against the company’s secretive Canadian parent, MindGeek; its owners and executives; and Visa, which processes payments for the porn site. Hedge fund Colbeck Capital, which underwrote a debt financing for the company, was mentioned in the complaint, but not sued.
“MindGeek is a classic criminal enterprise run, according to those who know it best, ‘just like the Sopranos,’” according to the complaint, written by Mike Bowe, partner at Brown Rudnick, who is representing the plaintiffs in the case.
MindGeek is an online pornography company, but according to the complaint, “is also one of the largest human trafficking ventures in the world. And it is likely the largest non-regulatory repository of child pornography in North America.”
The 179-page complaint, which is filled with details from women claiming they were victims of the porn site, was filed Thursday in the U.S. District Court in the Central District of California.
“The MindGeek defendants got rich,” the complaint alleges. “Also knowingly profiting along with them, were major American credit companies and banks, including in particular here, defendant Visa, who was uniquely suited to stop this exploitation but chose instead to participate in the profiteering.”
In a statement emailed to Institutional Investor, a Pornhub spokesman named Ian said, “Pornhub is currently reviewing and investigating the complaint filed today in California. Pornhub has zero tolerance for illegal content and investigates any complaint or allegation made about content on our platforms.” It added that “the allegations in today’s complaint that Pornhub is a criminal enterprise that traffics women and is run like ‘The Sopranos’ are utterly absurd, completely reckless and categorically false.”
The complaint included Visa as a participant in the scheme because it engineered and facilitated “credit card and financial transactions to siphon off illicit profits and avoid credit card red flags,” according to the documents.
II previously reported the credit card companies’ role in the Pornhub enterprise, and the lengthy efforts of anti-trafficking activists to convince them to cut ties with the porn empire. As detailed in that story, their efforts went unheeded until an explosive exposé of Pornhub in the New York Times in December, which was followed by prodding from hedge fund manager Bill Ackman, CEO of Pershing Square Capital Management.
MindGeek Bosses and “Over-Bosses”
Bowe, the veteran litigator from Brown Rudnick, alleges that the criminal enterprise’s “bosses” are MindGeek CEO Feras Antoon and financier Bernd Bergmair, who II also previously reported as the majority owners of the company.
Antoon and Bergmair represent “a group of uber-wealthy owners of the company,” according to the complaint, which calls them the “over-bosses” of the enterprise who are “unknown to the public and even to Antoon because they do not want to be publicly associated, or even risk being publicly associated, with the criminal enterprise they fund and from which they profit,” the complaint adds.
The complaint also alleges that the MindGeek enterprise “was comprised of a network of sham shell entities throughout the world, the vast majority of which existed solely as vehicles through which to execute the Enterprise’s rackets and scams and evade taxes.”
“These sham entities were directed and controlled by MindGeek executives, including defendants Bernd Bergmair, Feras Antoon, and Corey Urman, who were in turn controlled by and directed by MindGeek’s financiers, including defendant Bergmair,” it alleges.
A $350 Million Loan from Colbeck Capital Was Key
The complaint offers a historical account of the financing that allowed MindGeek to survive — and thrive.
“From its birth, the Enterprise now known as MindGeek was awash in criminality,” according to the complaint. It said the company was being investigated for money laundering in the 2000s and that “in 2009, the Secret Service seized $6.4 million from the company’s bank accounts and those of its then nominal owners as a result.”
“To get out from under that public scandal,” according to the complaint, the company was sold to Fabian Thylman, a German national, “who was funded by unknown investors from Eastern Europe.” The “syndicate” raised more than $350 million to buy the company with a secured debt financing “through the boutique investment banking firm Colbeck Capital, run by two former Goldman Sachs investment bankers.”
Colbeck Capital did not respond to emails and phone messages.
“The loan was secured by all of MindGeek’s assets, including its intellectual property and provided substantial control over management and the company’s operations.” It also had an interest rate of 24 percent, “reflecting the unwillingness of legitimate mainstream capital to invest in the company because of the innumerable red flags of illegality,” the complaint alleges.
In 2012, owner Thylman was arrested on tax fraud and the company’s owners and management “scrambled to seemingly ‘clean wash’ the company, cover its tracks, and claim a new regime was taking over,” the complaint stated.
“However, the existing loan’s onerous terms, as well as the Bro-Club’s syphoning off of all cash not used to pay the loan, left MindGeek no options for buying out Thylman, paying off the loan, and executing a transition that would be publicly credible,” the complaint adds.
That’s when, according to the complaint, Bergmair became a majority owner, through a convoluted ownership structure that restructured the Colbeck debt.
“Like the principals of Colbeck Capital before him, Bergmair was a former Goldman Sachs investment banker who had left to provide niche financing for legally dubious ventures Goldman Sachs and similar Wall Street firms would not fund,” the complaint alleges.
As II had previously reported, Bergmair’s identify was long a secret. The complaint alleges that he “took extreme steps to conceal not just his identity, but his very existence” because “he and his investors were fully aware of the legally dubious nature of the business they owned and ran, and some of these investors were themselves the subject of international legal scrutiny or associated with those who were. The investors were so uneasy being associated with this business, they were rabid about even their financier becoming known.”
Complaint Alleges Visa Profited From Trafficking
Visa is named as a defendant in the racketeering scheme because, according to the complaint, it profited from the trafficking venture.
“Uniquely situated to prevent MindGeek’s trafficking venture were the financial institutions processing the transactions upon which that venture monetized the content. At the top of that list were major American credit card companies Visa and Mastercard,” the complaint alleges.
The role of the credit card companies became apparent with the New York Times’ exposé, which led to Ackman’s involvement.
“But that expose was not a bombshell to Visa and Mastercard,” the complaint alleges. “For over a decade they had been well aware of the facts the New York Times exposed and instead of insisting that MindGeek commercialize only legal consensual content, and comply with United States laws concerning the same, they elected instead to facilitate and profit from the MindGeek trafficking venture.”
Mastercard has quit all processing with Pornhub. But Visa has not done so. “Even today, Visa continues to process payments for MindGeek pay sites that are themselves rife with trafficking and are promoted, marketed, and sustained by the MindGeek trafficking venture,” according to the complaint.
The complaint lays out the role of financial institutions, saying that they were aware of real instances of trafficking and pornography from their own compliance efforts. “Indeed, since its inception, all one needed to do was visit MindGeek’s tubesites to observe tens of thousands of videos (with the help of MindGeek’s suggested search and video algorithm) depicting subjects who were obviously underage, under duress, incapacitated, being raped, or secretly exploited. One would also easily observe tens of thousands more videos depicting the very same content where there was no way to determine whether the content was a consensual depiction of a nonconsensual event or non-consensual.”
These institutions “were uniquely capable and in the best position to understand this,” it continues. “And they did understand this. They simply chose to do business with MindGeek and benefit from its trafficking venture nevertheless.”
Finally last December Mastercard determined through its own investigation that Pornhub was acting illegally. But Visa did not go that far, merely acknowledging “allegations of illegal activity,” according to the complaint. “Visa’s investigation revealed the same thing, and more, yet it refused to also publicly acknowledge this fact because it wanted to continue doing business with, and profiting from, MindGeek’s trafficking venture. And that is what it did.”
Visa did not respond to a request for comment. But it previously offered this statement:
“Visa’s suspension of acceptance privileges for Pornhub and other MindGeek content sharing platforms that host user-generated content remains in effect pending the completion of our ongoing investigation. Visa is committed to processing all transactions that are legal. As a global platform, maintaining a neutral stance under the law is vital for the free flow of commerce.”
In its statement to II, Pornhub added, “We stand resolutely with all victims of internet-related abuse. Pornhub takes every complaint regarding the abuse of its platform seriously, including those of the plaintiffs in this case. The fact is, Pornhub has in place the most comprehensive safeguards in user-generated platform history, which include the banning of uploads from unverified users, expanding our moderation processes, and cooperating with dozens of non-profit organizations around the world. We do not intend to let the racist undertones and hyperbolic language in the lawsuit distract from the fact that Pornhub has in place a safety and security policy that surpasses that of any other major platform on the internet.”