Could the taxman turn off the King of Porn?

Tony Paterson investigates the bizarre world of Fabian Thylmann – the introverted family man who made sex sell on the internet

He has been dubbed the "King of Porn" – but the man who has achieved global domination in the booming business of internet pornography was until recently a phantom figure. Just two years ago a team of investigative journalists from Germany's Süddeutsche Zeitung newspaper tried to track down the entrepreneur behind You-Porn, the online sex site which today enjoys a reputation almost as wide as its less salacious cousin YouTube on which it is modelled.

The journalists followed up one lead which landed them at the house of an unnamed British businessman. He happened to be having breakfast with his children in his garden when they arrived. He had no desire to discuss internet sex and saw them off the premises.

The businessman turned out to have nothing to do with online pornography. A second possible candidate threatened the reporters, their third possibility refused to answer any of their questions. They had drawn a blank and the man behind YouPorn seemed destined to remain a permanent mystery.

Last week, however, the identity of Mr "YouPorn" was suddenly and involuntarily laid bare. State prosecutors in Cologne revealed that at their insistence, the reclusive 34-year-old German owner of the sex site and seven more of the world's most sucessful internet porn sites had been arrested in Brussels on charges of widespread and persistent tax evasion.

His name is Fabian Thylmann. Yesterday he was sitting in custody in a Cologne police cell after having been extradited from Belgium, where he lives. He faces charges of persistently avoiding paying tax on the £60m his vast global online sex network is estimated to earn each year. Mr Thylmann is contesting the charges.

Notoriously publicity shy, Mr Thylmann looks like an archetypal computer nerd: he is chubby, pale faced, sports thick glasses and jeans and likes wearing baggy tracksuit tops. His background and lifestyle betray little which would point to an individual committed to a life in porn. He is married with two children and lives a reclusive middle-class existence in Belgium, well removed from the prying eyes of his native country's mass circulation Bild newspaper.

Born in the German city of Aachen, close to the border with Belgium, he moved to Brussels with his parents when he was a teenager and graduated at the city's international school. A job as a humble computer programmer followed. But within the past decade he has managed to revolutionise the entire business of pornography consumption and like it or lump it – he has made online sex instantly available to all. Germany's Focus magazine referred to him recently as "The Ruler in the Realm of Lust".

Mr Thylmann's online porn video empire is run by its parent company "Manwin" which is the industry's global leader. His sex sites include brand names such as YouPorn, Brazzers, PornHub and MyDirtyHobby. Using the same principle as YouTube, his websites allow visitors to watch pornographic videos for free. The income is generated by advertised sex "pay sites" which appear alongside and offer longer, full-length porn videos. An estimated 16 billion viewers click on to Manwin's sites every month. Only a fraction are reported to use the pay-for sites, but they are sufficient to bring in revenues in excess of £60m each year.

Manwin's porn sites go through the motions of attempting to filter the age of viewers. Visitors have to press a panel declaring that they are 18 or over before entering. However, once inside, the variety of pornography on offer is sufficient to gratify virtually every erotic predilection, fantasy and fetish. Mr Thylmann's sites are not for the squeamish or faint-hearted. Videos with titles such as German Lesbian Granny Sex Orgy or Mother-in-Law Seduces Shy Cleaner are part of Manwin's staple diet.

Mr Thylmann gave his first and only interview to the media last year when he was sought out by journalists from the German edition of the Financial Times at a porn industry conference in Las Vegas. "Our objective is actually rather banal," he told them. "We want to create as many opportunities as possible for people to spend money." He said he was glad to be interviewed because it "cleared up rumours" and "dispelled conspiracy theories" concerning his identity. Yet he was never heard of again until last Tuesday.

His breakthrough began in the late 1990s when he was still working as a computer programmer. Mr Thylmann developed special computer software called Nats (Next-generation affiliate tracking software), which linked up the vast number of internet pornography sites for the first time and enabled visitors to select sex films according to personal preference. "Nats was very easy to use and could do what the others couldn't," Mr Thylmann told Germany's FT

The success of Nats encouraged Mr Thylmann to start his own online sex sites. He began in 2006 by securing a licence for the Playboy label which gave him control of all of its television and online productions. YouPorn followed the same year. Its formula for success is to offer visitors free and unlimited viewing of videos drawn from a vast and constantly updated library of professional and amateur sex films. Sixty million viewers surf Mr Thylmann's porn sites each day.

The rise of YouPorn and similar sex sites has crippled the traditional porn industry, which relies on sex film cinemas, pornographic DVDs, magazines and sex shops to generate income. If the complaints of those involved in the sex industry in famous locations such as Hamburg's famous Reeperbahn red-light district are to be believed, then virtual sex has also hit its real-life equivalent: prostitution. The Reeperbahn's last traditional brothel was forced to close down more than two years ago because of a dramatic drop in trade over the past decade.

By contrast, Mr Thylmann's, Manwin and its subsidiary companies currently control and largely dictate the terms of a booming global online sex-video market including the content of individual films. The company currently employs a staff of 1,000 across the globe and has over 35 subsidiaries in Luxembourg, Canada, Cyprus, Germany, the US, Britain and Ireland.

Germany's Die Welt newspaper claims to have exposed Mr Thylmann as a tax evader and to have been influential in securing his arrest. Its journalists said they had gained access to Manwin's internal accounts which showed that although German pornography actors performed for his sex videos in Germany, they were paid by a subsidiary company in Cyprus. They insisted that the form of remuneration was in flagrant breach of German tax laws.

Mr Thylmann denies that he avoided tax and maintains that he was merely minimising his tax burden in accordance with widely accepted practice. His lawyers will now have to convince German state prosecutors that there is no case to answer. If they fail Germany could soon be hosting the King of Porn's trial.