Luxembourg accused of enabling Pornhub’s global dominance

The world’s largest pornography distributor picked Luxembourg for its global headquarters in 2013 because it was a centre for tax evasion and money laundering and had weak laws around pornography, lawyers attacking the Pornhub parent company claimed in a new US legal filing.

In the decade after setting up shop in Luxembourg, the company then called MindGeek and now rebranded as Aylo became the dominant online pornography company in the world, lawyers for a woman suing the company behind Pornhub and other websites said in their latest wide-ranging attack on the company. Lawyers in the California lawsuit brought by Serena Fleites say she was 13 when she was videotaped having sex in clips that were posted on Pornhub and stayed there despite her efforts to stop it.

“MindGeek built this empire by knowingly and intentionally adopting an unrestricted content business model under which they would solicit and monetize all pornographic content without restriction, including child pornography and other nonconsensual content,” Fleites’ lawyers say in their complaint also targeting credit card giant Visa and investment funds that allegedly financed Mindgeek’s growth.

Luxembourg helped the porn company’s growth with its hands-off attitude despite it employing only a handful of people in the Grand Duchy, the lawyers said in updating their arguments late last month to the judge hearing the potentially explosive case. Parties suing in US federal courts are allowed to update their grievances as the process develops and they collect new information.

“From MindGeek’s inception, it used a shifting, opaque, and Byzantine international corporate structure to, among other things, avoid rigorous laws governing pornography, particularly child pornography,” the lawyers said.

“This structure obscured MindGeek’s ownership and operation from authorities and manufactured the fiction that it was a Luxembourg company operating out of Cyprus. It selected these jurisdictions because they were havens for tax evasion, money laundering, and had weak laws and enforcement related to pornography,” their updated complaint said.

Luxembourg officials have always denied the country has looked the other way at tax evasion and money laundering.

Pornhub, Aylo and the private equity company behind both entities declined comment to the Luxembourg Times on the claim of how Luxembourg was picked as the official corporate home, or whether that is why Aylo remains in the Grand Duchy today. The facts of the case will be fully aired in court, a Pornhub spokesman said.

Mindgeek’s Luxembourg arrival came three years after the global anti-money-laundering watchdog in 2010 declared the world’s second-largest fund management centre as largely failing to take steps necessary to thwart criminals.

Luxembourg was given a clean slate in 2014 after a new Financial Action Task Force (FATF) review. But the country’s reputation has continued to suffer from reports alleging it is still a soft touch for those hiding illicit funds.

The latest FATF review found in 2023 that Luxembourg was largely compliant with global anti-money-laundering rules, but wasn’t detecting and prosecuting larger money-laundering cases that could exist due to the country’s finance hub.

Luxembourg has long been criticised for allowing shell companies with little more than a postal address for a presence to set up in the Grand Duchy in order to channel profits to tax havens. The European Commission said last year that Luxembourg is still facilitating companies seeking to avoid taxes through government policies.

MindGeek employed six people in Luxembourg in 2021, the last time the company filed what are supposed to be annual financial declarations in the Grand Duchy. The company did not respond when the Luxembourg Times again asked about the failure to publish annual accounts.

Aylo last year moved its headquarters from Luxembourg’s Boulevard Royal to Grand-Rue. 

Luxembourg also does not hold companies accountable for their human rights track record, unlike other European countries. In France, for example, large companies are subject to an assessment of environmental, human rights and corruption risks, including subsidiaries and contractors abroad..

Luxembourg’s governments have ignored requests to introduce a national due diligence law to screen firms with a presence in the country, such as Pornhub owner Aylo or spyware company NSO, for potential ESG violations.

Last month, former Luxembourg economy minister Franz Fayot proposed a law allowing the country to dissolve holding companies in the Grand Duchy if their foreign subsidiaries are linked to criminal behaviour abroad and are deemed “toxic” to the country’s reputation. The proposed legislation cited cases including Aylo.

In 2021, an investigation by journalists around the world dubbed OpenLux found evidence that Russian mafia bosses and people with ties to Italian organised crime gangs were among those hiding money in the Grand Duchy, allegations that the government said were unsubstantiated.

Though Aylo claims Luxembourg as its legal headquarters, it has long been run from Montreal, Fleites’ lawyer Michael Bowe said during a California court hearing in March.

“The actual mind and management of this company was not in Luxembourg. There was nothing in Luxembourg. There was an office with wires hanging and tiles down,” Bowe said, referring to the company’s operations after reviewing internal documents and reports. “Everybody was in Montreal. These meetings where all the decisions were made were in Montreal.”