'Megatrouble' for Megaupload

U.S. Courts are currently attempting to extradite Megaupload founder Kim Dotcom after New Zealand courts denied his bail on February 3. Dotcom was arrested on January 20, in a massive raid by New Zealand Special Forces troops on his home, after U.S. prosecutors alleged that Megaupload was used primarily for pirating copyrighted material.

Dotcom's supporters claim that this show of force was excessive and was an attempt to strike fear into the online pirating community in the wake of so much popular rejection of the SOPA and PIPA bills proposed in Congress.

Megaupload offered cloud data storage services through third party server operating companies, which are used for a number of reasons. American companies utilize these services from operators such as Amazon, Microsoft, Atmos and Symantec. The companies can store their data off site, forgoing the necessity of storing and maintaining the hardware on site. Employees of the companies can then readily access data from office, home or out of town, keeping up to date on project developments or making changes to group projects from outside of the office. Such data is usually insured and secured against corruption and loss, and can be accessed and manipulated from any platform or operating system.

It was claimed that membership incentives offered by Megaupload encouraged the spread of copyrighted material and that cash rewards for members who attracted the most new business were evidence of this practice. Although Dotcom was a resident of New Zealand and his company, Megaupload, was based in Hong Kong, some of their cloud storage was hosted by third party operators in Virginia. This was sufficient for the FBI to begin an investigation, which led to Dotcom's arrest and upcoming extradition hearing.

Amid allegations that his company has cost over $500 million in damages to American film and music industry companies, Dotcom has been charged with Conspiracy to Commit Racketeering, Conspiracy to Commit Copyright Infringement, Conspiracy to Commit Money Laundering, Criminal Copyright Infringement By Distributing a Copyrighted Work Being Prepared for Commercial Distribution on a Computer Network & Aiding and Abetting of Criminal Copyright Infringement and Criminal Copyright Infringement By Electronic Means & Aiding and Abetting of Criminal Copyright Infringement.

Dotcom has pled not guilty and maintains that Megaupload has always responded to claims of copyright infringement by investigating and removing offending material. Dotcom's lawyer Paul Davison stated in court, "His business did not reproduce or copy material as alleged," and that any copyright holders who had approached the company were given access to the site to verify that their material had been removed.

Megaupload had even received endorsement from many celebrities in the film and recording industries and was planning on releasing a jukebox type service, which would pay artists directly through advertising for music played and listened to for free by users.

Dotcom is being held in New Zealand and has been denied bail, as past criminal charges have categorized him as a flight risk. All of his assets have been seized including $7 million worth of vehicles and his mansion. His wife, who is pregnant with twins, and his children have been evicted from their home and forced to live on the charity of friends as they await the results of an extradition process which will likely take months. Papers are expected to be filed February 22.

The move by U.S. prosecutors has had mixed results, regardless of the outcome of Dotcom's case. Some other online hosting companies such as Filesonic have reacted by disabling the sharing capabilities through their service, allowing users to only access data which they personally have uploaded into their own account. Other providers have simply blocked all access to their servers from users in the United States. For many other sites, however, there has been no effect whatsoever. There is even another service, called Tribler, which has taken this opportunity to announce that its file sharing technology is impossible to shut down. In a statement to the website TorrentFreak, the leader of the team, Dr Pouwelse, explained that "Our key scientific quest is facilitating unbounded information sharing." Tribler is decentralized and holds no files in storage anywhere. Instead it is based on peer to peer connections for file sharing and has been up and running continuously for the past six years with no downtime.