On a Saturday morning last December, Bill Ackman was scrolling through Twitter when an article in The New York Times caught his eye. The Children of Pornhub, by Nicholas Kristof, told how unauthorized sex and rape and torture videos were being spread across the internet on a website called Pornhub, one of the most popular in the world.
Ackman, who has four daughters, was outraged when he read how one teenager ended up a Pornhub victim after sending a naked video of herself to a boy she had a crush on. Harassed and humiliated, the young girl attempted suicide.
In your mind replace the victims with your daughter or son, the hedge fund manager and CEO of Pershing Square Capital Management wrote when he retweeted the article. We could fix this problem.
Then he swung into action. Ackmans first step was to call Bradley Myles, the former CEO of antihuman trafficking nonprofit Polaris, whom Ackman had met through his charity, the Pershing Square Foundation.
He was reaching out to me and asking whats a metastrategy for addressing this whole area of nonconsensual intimate images. He was thinking at a strategic level, recalls Myles, who is now a senior adviser at Panorama Global, a not-for-profit social impact platform.
Kristofs piece wasnt about the money behind Pornhub, which is owned by a secretive, private Canadian corporation called MindGeek, or the many corporations that profit from its existence. It focused on the writers moral outrage about the victims and their tragic stories of rape and abuse.
But Ackman had noticed a salient fact buried near the end of Kristofs story: Mastercard and Visa were payment processors for Pornhub, and search engines were also part of the corporate apparatus that allowed the worlds largest porn empire to flourish. MindGeek might be privately owned, but those companies are not.
An influential shareholder activist, Ackman immediately thought about the growing interest in ethical, or ESG, investing.
And thats where the billionaire hedge fund titan who has unseated several corporate CEOs in his career saw an opening. In this case, he wasnt an investor in any of the publicly traded companies that he knew were profiting from Pornhubs content, which is often uploaded from users the same way individuals post videos on YouTube.
But he was friendly with Mastercards then-CEO Ajay Banga, whom he had met through a mutual friend. Ackman texted Banga, providing a link to Kristofs story with his tweet: Amex, VISA and MasterCard should immediately withhold payments or withdraw until this is fixed. PayPal has already done so. (Ackman was unaware that American Express already did not allow its card to be used on adult sites.)
Banga quickly wrote back: Were on it.
Then things began to move. Within days, Mastercard announced it had instructed the financial institutions that connect the site to our network to terminate acceptance of Pornhub charges, saying it had found evidence of illegal activity and was continuing to investigate.
Visa also stopped processing Pornhub payments, at least temporarily, and launched an investigation. Within 24 hours of the credit card companies actions, Pornhub said it had taken down 10 million videos, or 80 percent of those on its site.
Since then the Parliament of Canada and the U.S. Congress both have held hearings, legislation has been proposed, lawsuits have been filed, and there have been calls for a criminal investigation.
As it turns out, the backers of MindGeek come from the pinnacle of the worlds of finance and academia, and Pornhub has had business ties with some of the most well-known corporations on the planet.
Its shareholder money that fuels this activity, says Ackman. He points out that while the environmental and governance efforts of ESG or environmental, social, and governance investing get a lot of attention, the S part has come in third.
He notes, Lots of companies say that theyre really great with ESG issues, but theyve got to look a little deeper.
To be sure, Ackman is only one player in the grand scheme of Pornhubs reckoning which might not have occurred without Kristofs shocking expos. But the involvement of the high-profile financier drew more attention to a campaign for accountability that activists had been waging for almost a year with little success.
Human rights activist Laila Mickelwait had been battling sex trafficking for about 15 years when she came across Pornhub in her research. As she told Institutional Investor recently, The New York Times wasnt the first newspaper to write about its abuses. In November 2019 an investigation by Londons Sunday Times had found dozens of illegal child exploitation videos on the site and called out Pornhub advertisers Unilever and Heinz.
After the Sunday Times story, those advertisers left and PayPal quit processing payments for Pornhub. But Mastercard, Visa, and Discover stuck with it.
Mickelwait launched her own campaign on February 9, 2020, writing a piece in the Washington Examiner titled Time to Shut Pornhub Down. The article led to what she has labeled the Traffickinghub movement, a nonpartisan, nonreligious global effort to hold Pornhub . . . accountable for enabling and profiting from the sex trafficking and criminal sexual exploitation of victims.
Traffickinghub has since gained support from more than 2.2 million people from 192 countries and has been endorsed by more than 300 organizations, according to its website.
One of the movements first efforts last year was to reach out to the credit card companies, which Mickelwait had learned were vital to Pornhubs survival.
On May 6, 2020, she received a promising email from Mastercard European general counsel Thibaut Gregoire, saying that her May 1 letter to CEO Banga (now the firms executive chairman) had been forwarded to him.
We really appreciate that you share your concerns with us, wrote Gregoire in the email, which II has obtained. This is something we take very seriously. Please also know that we view ourselves as always trying to do the right thing and we sincerely appreciate hearing from interested parties about what they observe in our ecosystem that can help us do our job better.
The credit card companies were flooded with emails, says Mickelwait, receiving tens of thousands of comments from advocates through both the Traffickinghub movement and U.K.-based Freedom United, one of the worlds largest anti-trafficking groups.
Mickelwait quickly set up meetings with compliance executives at both Visa and Mastercard. During those meetings, she says, we highlighted again and again the fact that there were these sexual crimes, sex trafficking, on the site, making it clear that they were profiting from that exploitation, enabling that exploitation.
But nothing happened. Basically, what they said was, This is the responsibility of the banks, and so were going to put it on the banks, says Mickelwait.
And whereas Mastercard and Visa at least engaged, she says she never heard from Discover.
Even when theNew York Times article came out, Pornhubs parent didnt back down. MindGeek was digging their heels in and saying it was all flagrantly untrue, Mickelwait notes.
Then Ackman tweeted.
At the time, Mickelwait didnt know who the hedge fund manager was, but she believes his outspokenness took the cause to another level.
Hes an unlikely advocate that you wouldnt normally think of using his platform to push for that change, but I mean, look what that did, she says. Bill pulled the leverage of the Mastercard relationship, and he called out Visa and Discover. And then, suddenly, theres reaction from the card companies, and Pornhub deleted 80 percent of their website.
Mickelwait adds, It just shows the power of finance, of financial pressure. It wasnt until Bill really laid on the pressure and said, Do the right thing, that they did.
Four months later, Mastercard unveiled a new global standard for transactions with the porn industry that went beyond Pornhub.
The banks that connect merchants to our network will need to certify that the seller of adult content has effective controls in place to monitor, block and, where necessary, take down all illegal content, John Verdeschi, Mastercards senior vice president of customer engagement and performance, said in a blogpost.
That statement is the biggest victory yet for the campaign. Mastercard has now enabled this global policy that prohibits their card to be used on any adult site that does not verify age, consent, and ID, explains Mickelwait. To me thats so much more powerful than even the United States enacting such a law, because in that case it would only apply to the United States and then wed have to enact that law in Canada, and in every country in the world.
The credit card companys action inadvertently raises a commonly cited dilemma in ESG investing whether governments are the entities best equipped to force change at companies or whether corporations can adequately regulate themselves, spurred on by investors or others.
The answer, at least in this case, appears to be both.
In the U.S. there is already a law requiring age verification of people whose images are used in pornography to protect children from sexual exploitation. But the new porn entrepreneurs, by going digital, thought they had bypassed the law by only hosting, not creating, the content on their sites.
Mickelwait, however, says there was a fatal flaw in that they put a download button on every video. Under current law, any site that transfers pornographic content is responsible for verifying the age of the people in it.
Because they had a download button that actually transfers from their servers onto the devices of millions I think it was up to 130 million a day in 2020 of visitors to the site, they have been responsible this whole time for record keeping. So what that means is they violated the criminal code of the United States millions of times, tens of millions of times, she says.
Pornhub has now taken the download button off its site.
Even so, in recent testimony before the U.S. Financial Services Committee, Mickelwait recommended amending the law to make such behaviors explicitly illegal.
Shortly after Kristofs article was published, three bills were introduced in Congress to deal with the issues raised. One piece of legislation, proposed by Senators Jeff Merkley, a Democrat from Oregon, and Ben Sasse, a Republican from Nebraska, would specifically require consent and age verification for individuals whose images appear on porn sites, amending the current law. Similar legislation has been proposed in Canadas Parliament.
But new laws likely arent needed for litigation to proceed, or for more financial pressure to be put on MindGeeks owners and Pornhubs many business partners.
The day of The New York Timess bombshell report, another pressure point was brought to bear: Michael Bowe, a veteran litigator with law firm Brown Rudnick, sent the credit card companies whats called an evidence preservation letter, notifying them to preserve their documents essentially alerting them that they may be sued as part of a lawsuit against the many players and people involved.
The Trafficking Victims Protection Act makes them liable, because yes, they did know about it but they didnt do anything about it, argues Mickelwait. (With processing fees of up to 2.5 percent or more charged by Visa and Mastercard, Pornhub likely earned the credit card companies millions of dollars a year.)
The most effective way to change these corporate facilitators of exploitation is to make the risk of exploitation outweigh the rewards that theyre getting from not addressing it, and that is through civil litigation, says Mickelwait.
Bowe became famous in financial circles for a videoed civil lawsuit deposition of hedge fund kingpin Steve Cohen, in which Bowe grilled the thenSAC Capital CEO about insider trading. The video became part of a 2013 PBS documentary, To Catch a Trader.
For more than a year, Bowe has been investigating MindGeek. Earlier this year he testified before Canadas House of Commons Ethics Committee that one of the victims he was representing had expressed concern she was being followed and said her tires had been slashed. After that she disappeared.
Bowe said there were videos of adult women and trafficked women on the site and that one child under ten years old had been sold into trafficking and was the subject of child porn for almost ten years. This is about rape, not porn. Its about trafficking, not consensual adult performance or adult entertainment, he told the committee.
Testimony by the companys executives before the Ethics Committee also revealed, for the first time, that MindGeeks majority owner is 52-year-old Bernd Bergmair, but it did not disclose where he lived.
However, investigative journalist Alexi Mostrous recently tracked down the porn mogul near his London home. Mostrous says his team at Tortoise Media discovered that Bergmair, who had virtually no online presence until this scandal erupted, had attended the University of Chicago Business School and worked for Goldman Sachs and McKinsey in the late 1990s. Soon after that, says Mostrous, Bergmair fell off the grid. Corporate documents in Luxembourg, where MindGeek is domiciled, indicate Bergmair owns 60 percent of it, according to Tortoise.
Bergmair who refused to talk to Mostrous when the reporter confronted him in front of Bergmairs posh London residence could not be reached for comment.
MindGeek had more than $460 million in revenues in 2018, according to the Financial Times. But recovering any of MindGeeks money for victims may be difficult, says lawyer Dani Pinter, senior counsel at the National Center on Sexual Exploitation, which is helping to represent victims in a class action lawsuit against the Canadian company that was filed in February.
She notes that there are 300 shell companies under MindGeek, with 100 of them at the same address. They are moving money around. They start an incorporation; the company doesnt do anything and has no employees.
Pinter adds, Its definitely a concern they are going to try to hide their money. She notes that the company has an operation in Cyprus, reputed to be a haven for laundering illicit money.
MindGeeks obsession with secretiveness went beyond shell companies. Bergmair apparently tried to hide his name for years by using a similar name, Bernard Bergemar, on legal documents. Some execs at MindGeek used fake names in their correspondence with the media, according to Business Insider.
Yet despite its many legal and financial problems, having lost advertisers and business partners while under government scrutiny and facing massive litigation, MindGeek is reportedly in the midst of trying to sell itself. The deal is said to be fairly far along, according to individuals II has spoken with who are familiar with the effort. A potential sale to Canadian cannabis entrepreneur Chuck Rifici, also the former CFO of the Liberal Party of Canada, was first reported by Business Insider. Rifici, who recently formed a private equity firm called Bruinen Investments that promises ethics first investing, did not respond to a request for comment.
I dont know what responsible business person would buy a company under such serious investigation, says Pinter. My sense is that [the owners of MindGeek] see impending criminal investigations coming their way and they want to cut and run.
In the recent hearing of Canadas House of Commons Ethics Committee, MindGeek COO David Tassillo defended the company, saying, Were trying to create a safe environment for people to consume adult content, and we understand there are people out there that are trying to misuse these platforms.
Human rights activists say the evidence belies that statement, noting that the company simply doesnt have enough employees to oversee the content. As Mickelwait tweeted recently: Internal documents show MindGeek had under 10 moderators for Pornhub per shift and 3 moderators per shift for all of their other porn tube sites combined. MindGeek is complicit.
Meanwhile, the National Center on Sexual Exploitation is focusing on getting other Pornhub financial partners like Google to take action.
With a 90 percent market share of the search engine market, Google is de facto advertising for the hard-core porn industry, says Lina Nealon, director of corporate and strategic initiatives for the nonprofit, who says the group first raised the issue with Google in February 2020, when it met with executives there.
Bowe explained in his testimony before the Canadian House of Commons Ethics Committee that Pornhubs goal is to end up number one in Google searches.
To do so meant having more content, more search terms, more descriptions, he said, explaining how any effort to monitor the site for illegal content would hurt that effort. As soon as you somehow try to police the content on your site . . . you start losing content. You start delaying upload time, you start losing the search engine optimization race. So they decided not to do anything about this.
MindGeek bills itself as a tech company, one offering industry-leading exclusive technologies driving unparalleled performance, according to its website. And indeed, Pornhub did master the art of SEO, which means that Google ends up driving people to its sites.
These websites have spent years gaming your algorithm, Pinter says she told the Google executives. You have absolutely no idea whether any of this content is legal or consensual. But now that Google is aware of the illegal activity going on, she admonished them, stop allowing them to use Google to get to their sites.
Google did not respond to a request for comment, but Nealon says the tech giant has told her it is making efforts. In the past, she says, if you googled happy black teen, you would be flooded with images of hard-core porn and torture porn. That is no longer the case.
If you google child pornography now, you dont get any links to porn sites, explains Nealon. But we believe it should be the same for other search terms, like slave porn or rape porn. (MindGeek executives testified in the Ethics Committee hearing that the word teen really means people over 18.)
Google hasnt gone as far as the anti-trafficking group wants. In a recent Google search for slave porn that II conducted, for example, Pornhub comes up second in the ranking.
Its excuse is that they want to have a free and open internet. They dont want to prohibit searches for legal pornography, Nealon says.
The irony is that Google is one of the companies most often found in ESG index funds and exchange-traded funds, which tend to overweight tech companies and underweight those invested in fossil fuels. And Googles top two owners are Vanguard and BlackRock, two institutional investors that say they are committed to the principles of ESG investing.
Nealon has not yet contacted Googles investors she says she is just beginning to look at tapping shareholders in publicly owned companies as a tool for change. They can put pressure, and were looking into it more, especially when we havent heard back from the corporations themselves.
Some investors arent even aware of the situation, she says. If they knew this was happening and their money was going to support it, they would demand change, Nealon says.
Ackman argues that big shareholders have a critical role to play here. CEOs get a zillion emails, but the one group that rises to the top of the line . . . is its biggest shareholders, influential shareholders. An ESG fund can decide not to own a company because it doesnt meet their criteria, he says.
A tweet can move the needle, Ackman adds, prodding other big investors to get involved.
With the ascendance of ESG investing, shareholders may start to move more quickly to demand change at companies profiting from all types of bad behavior. The abuses at Pornhub, however, went on for more than a decade before anything happened to stop them, according to Mickelwait.
These days, with the credit card companies having abandoned Pornhub, the only way to pay for its content is with cryptocurrencies. But problems remain. Visa, for example, is still processing payments for some of MindGeeks porn content, and it has refused so far to meet with victims as part of its investigation, say Mickelwait and Nealon. Nor has it followed Mastercard in adopting a global standard.
Visa did not respond to questions about those claims, but it did send II a statement. Visas 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, a spokeswoman wrote.
Mastercard and Discover did not answer requests for comment.
Recently, the Pornhub campaign had another victory when cable company Comcast said MindGeek content would no longer be shown on its channels. Pornhub is still available via Roku, according to Nealon.
And though Pornhub has taken down 80 percent of its content because the owners arent verified, that has not stopped so-called verified users from uploading nonconsensual images. And all it takes to become verified is to upload a photo of yourself with your user name no ID required, Nealon points out. She argues that many of the reports in news stories like Kristofs came from verified accounts including the girl whose boyfriend posted a video of her nude body indicating that the effort to clean up the site is completely meaningless.
Ackman is still watching events closely. Although he applauds Mastercard for taking the lead in the battle over Pornhub, the hedge fund manager remains incensed that more hasnt been done to stop similar abuses elsewhere.
After Kristof wrote a follow-up piece in April outlining how another site, XVideos, was profiting off Pornhubs woes, Ackman was back on Twitter, shaming every search engine company he could think of and trying to rouse investors ire.
How can ESG investors invest in @google @Bing @Microsoft @Yahoo @Twitter when they facilitate and profit from the distribution of child rape porn? he tweeted.
And then Ackman asked the investment world a simple question: How can this continue?
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