Why Private Equity firm Ethical Partners acquired Phub?

06:31 PM Mar 17, 2023 IST | Ground Report

A new private equity firm based in Canada, Ethical Capital Partners, has reportedly acquired MindGeek, the company responsible for operating major adult media sites such as YouP and Phub.

The acquisition price was not disclosed. The MindGeek will continue to be managed by its current group of executives alongside ECP’s management team, which includes lawyers and former cannabis investors.

MindGeek faces accusations of illegal content

MindGeek has been a controversial brand due to its failure to prevent the uploading and viewing of illegal videos, including child sexual abuse material.

In 2020, major credit card companies such as Visa and Mastercard stopped providing services to Phub, leading to the removal of most of its videos and the implementation of a mandatory age verification system for actors.

In late 2020, New York Times columnist Nicholas Kristof accused MindGeek of sex trafficking, child pgraphy, and rape videos, leading to Visa and Mastercard suspending their credit card services for the site. This action disabled millions of accounts and resulted in MindGeek banning unverified uploads.

MindGeek, which owns popular sites such as YouP, Redtube, and Brazzers, has pledged to further its research and adoption of online safety protocols to maintain its status as a world-class leader in trust and safety.

The company has stated that its platforms are inclusive, sex-positive spaces for adults, with a focus on consent, freedom of sexual expression, authenticity, originality, and diversity.

Who owns Phub?

On Thursday, Ethical Capital Partners (ECP), based in Ottawa, announced that it had acquired MindGeek, the owner of numerous pographic websites, including Phub.

MindGeek and the Challenges of Online Pgraphy

ECP has referred to MindGeek as the leading internet company in combatting illegal online content. The private equity firm has highlighted several policies within MindGeek’s trust and safety program, including their manual moderation process which involves human moderators reviewing all uploaded content.

However, the online pgraphy industry, including MindGeek, faces significant risks due to US legislation such as SESTA/FOSTA.

This legislation has created an exception to Section 230, which now holds online platforms liable for facilitating prostitution and trafficking.

Consequently, payment and credit card companies such as Visa, Mastercard, PayPal, and Discover have become cautious about associating with such websites, and therefore no longer process payments on sites like Phub.

Safeguarding measures under scrutiny

According to Solomon Friedman, a co-founding partner and lawyer at ECP, the lawsuits and criticism faced by MindGeek may have arisen due to a lack of understanding regarding the company’s current content-safeguarding measures. This lack of understanding may have been influenced by the secrecy surrounding the previous owners.

Friedman emphasized that ECP’s new ownership aims to prioritize transparency and engage regularly with stakeholders, including the media. However, the private equity firm has not disclosed the amount it paid for MindGeek or the source of funds used to acquire the company.

Friedman confirmed that ECP’s management team, which includes lawyers and former cannabis investors, now have complete control over the acquisition and its assets. He also stated that previous shareholders have no remaining ownership, control, or rights over the company.