The Casual Encounters section on Craigslist has been mess for a long time.
I heard the same thing about the prostitution, but I believe they ended up simply shifting that part into a pay-by-ad service area, or something like that - the casual section is still very much there.
But it is mostly spam bot ads. CAPTCHA is the only protection against them, and most of the time it simply isn't enough. They're easy to program, effortless to run, and all you got to do for source material is take a few actual ads and voila, you're in business to spam copious numbers of ads. That they get banned so quick...
Well, my guess to that is that there are always high volumes of men looking for easy sex who're going to report any given ad because they a) think it is fake, b) didn't get a reply (at all, or fast enough), or c) have some ideological bent about the whole thing. But this is conjecture on my part.