Two hedge funds, Redwood Capital Management and Colbeck Capital Management, have been accused of participating in a sex-trafficking conspiracy. The accusations stem from their alleged financing of MindGeek (now Aylo), the parent company of websites like Pornhub and Brazzers.

The allegations were added to a three-year-old lawsuit filed in Los Angeles federal court by Serena Fleites. Fleites claims that at age 13, she was coerced by her boyfriend into appearing in videos that were later uploaded to Pornhub without her consent. The lawsuit now names Redwood and Colbeck as defendants, alleging that they provided hundreds of millions of dollars in financing to the individuals who built and managed MindGeek.

According to the lawsuit, the hedge funds conducted multiple rounds of due diligence before providing the financing, during which the risks of “illegal material” involving “minors” were allegedly raised. “During the decade of such financing, they were fully aware that MindGeek would be using the financing to monetize child pornography and other nonconsensual content,” the suit claims.

Spokespeople for both hedge funds have denied the allegations, asserting that they had no control over MindGeek’s operations and management. They also described Fleites’ claims as “baseless” and expressed confidence that the claims would be dismissed.

“The injuries alleged to have occurred to the plaintiff in this lawsuit are heartbreaking, but as one of dozens of former lenders to MindGeek, we had absolutely no control over the company’s management or operations,” a spokesman for Redwood said. “Shortly after learning of the deeply troubling allegations against the company in 2020, we fully divested our position.”

Similarly, a spokesman for Colbeck stated that the firm was a lender to MindGeek more than a decade ago, alongside nearly 100 other financial institutions. “We had no control over the company’s operations and management,” the spokesman added.

The case has drawn considerable attention since Fleites’ story was prominently featured in a 2020 New York Times article, which highlighted the prevalence of underage content on Pornhub. In response to the article, MindGeek removed over 10 million videos, approximately 80% of Pornhub’s content at the time.

In 2022, MindGeek was acquired by the Canadian private equity firm Ethical Capital Partners and rebranded as Aylo. The company entered a deferred prosecution agreement with federal prosecutors in Brooklyn, New York, agreeing to pay damages to women who appeared on its sites without consent.

Both hedge funds were founded by former Goldman Sachs Group Inc. alumni. Redwood Capital Management, established in 2000 by Jonathan Kolatch, manages around $9 billion. Colbeck Capital Management, founded by Jason Colodne and Jason Beckman, manages approximately $1.5 billion.

According to the lawsuit, Colbeck made a loan to MindGeek in 2011 with an effective interest rate above 20%. Redwood subsequently joined the financing effort. Fleites claims that the funds’ due diligence included reports from security and consulting firms highlighting the risks associated with underage content. The financing arrangement reportedly provided the funds with detailed reports on MindGeek’s business performance and legal risks, including instances when child pornography and nonconsensual content were raised by the press or government agencies.

The lawsuit alleges that despite these warnings, the hedge funds continued to finance MindGeek due to the high profits from the interest rates and fees. “They provided and continued to provide MindGeek hundreds of millions of dollars in financing because they too had a singular focus on profits,” the suit states.

The case, Fleites v. MindGeek, 2:21-cv-04920, is being heard in the US District Court for the Central District of California in Los Angeles. The outcome of this case could have significant implications for the financial institutions involved and the broader adult industry.

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