BUSINESS file-sharing site shut down, co-founders arrested at US request

TAGs: Anonymous, bwinparty, copyright, Department of Justice,, PIPA, SOPA

megaupload-indicted-copyright-infringementSeveral US politicians may have had second thoughts on the wisdom of adopting heavy-handed methods of protecting intellectual property, but no one appears to have told US law enforcement. Just one day after prominent sites like Wikipedia went dark to protest the PIPA and SOPA copyright bills pending in Congress, the Department of Justice unsealed indictments against Hong Kong-based file-sharing site, the site’s co-founders Kim Dotcom (formerly Kim Schmitz) and Mathias Ortmann, plus several other individuals and related companies, collectively referred to in the indictment as the “Mega Conspiracy, a worldwide criminal organization.”

The charges against Megaupload include copyright infringement as well as conspiracies to commit racketeering, money laundering and copyright infringement. Prosecutors allege that the infringement cost copyright holders over $500m in lost revenue, making it “among the largest criminal copyright cases ever brought by the US and directly targets the misuse of a public content storage and distribution site to commit and facilitate intellectual property crime.” The DoJ claims it had jurisdiction to act because some of the allegedly pirated material was hosted on leased servers in Ashburn, VA. The indictment was filed with the US District Court for the Eastern District of Virginia.

Dotcom, Ortmann, chief marketing officer Finn Batato and programmer Bram van der Kolk (aka Bramos) were arrested in New Zealand on Thursday at the request of US officials. The process of extraditing the arrested individuals to the US to face trial is expected to take up to a year. Three other defendants – graphic designer Julius Bencko, biz-dev man Sven Echternach and software development chief Andrus Nomm – remain ‘at large’. Eighteen domain names associated with Megaupload were ordered seized and an estimated $50m in assets have so far been confiscated.

While Megaupload was known to host copyrighted material, it was also popular among consumers and businesses because of its capacity to transfer files deemed too large to be sent via email. The DoJ claims Megaupload didn’t need to advertise the presence of infringed material on its site, instead choosing to actively support “the use of third-party linking sites to publicize infringing content.” Megaupload’s owners claim the site addressed infringement claims it received from rights holders, and before the indictments were made public, a statement on Megaupload insisted that “the vast majority of Mega’s internet traffic is legitimate, and we are here to stay. If the content industry would like to take advantage of our popularity, we are happy to enter into a dialogue. We have some good ideas. Please get in touch.” Careful what you wish for…

Interestingly, PartyGaming is cited as one of the companies that helped enrich Megaupload by advertising on the site. According to the indictment, “PartyGaming’s advertising contract with the Mega Conspiracy was initiated on or about November 12, 2009 and has resulted in payments of more than $3,000,000 to the Conspiracy. This contract was still active as recently as on or about March 18, 2011.” That $3m represents about 1/8 the total sum Megaupload is accused of reaping via online advertising revenue. That probably won’t play well when eventually applies for a US online poker license…

In a demonstration of ‘turnabout is fair play,’ the DoJ’s own website was knocked offline on Thursday, apparently the result of a retaliatory DDOS attack by the shadowy web group Anonymous. Sites belonging to the FBI, Universal Music, Warner Bros., the Motion Picture Association of America and the Utah Chiefs of Police Association were also affected. (Since no such sweeping retaliation happened post-Black Friday, can we safely assume that more members of Anonymous share copyrighted movies and music than play online poker?)

Ironically, the DoJ’s actions may produce further erosion of support for PIPA and SOPA. Speaking to the BBC, Mike McGuire, media distribution expert for researchers Gartner, gave voice to an increasingly popular theory: “If you can find and arrest people who are suspected to be involved in piracy using existing laws, then why introduce further regulations which are US-only and potentially damaging?” Mark Pesce, an honorary associate in digital culture at the University of Sidney, put a finer point on the day’s proceedings, reminding ABC Radio’s listeners that “you can get five years in jail for uploading a Michael Jackson video, which is a year longer than the doctor who killed him will get.” Beat it…


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