A Mega conspiracy unveiled

Article  \  14 Mar 2012

It has been a couple of months since police swooped on Megaupload founder and alleged "Mega Conspiracy". The case has created media frenzy in New Zealand and it seems that every few days there has been some further development in this case.

It has been a couple of months since police swooped on Megaupload founder and alleged "Mega Conspiracy" member Kim Dotcom and his buddies in a sleepy suburb north of Auckland. The case has created media frenzy in New Zealand and it seems that every few days there has been some further development in this case.

What was Megaupload?

Kim Dotcom and his buddies were operating what they called a "cyberlocker" site, a private data storage provider. What they were actually doing is a little unclear. His legal team would say he was operating some sort of safety deposit box. Prosecutors would say he was operating a digital crack house. The truth is probably somewhere in between.

The Megaupload.com website worked a bit like this: An internet user uploaded a computer file. Megaupload.com reproduced the file on at least one of its computer servers. Megaupload.com generated a unique Uniform Resource Locator or URL for that file. The user, or someone else, could then download the file once given the URL.

The site claims to have had more than one billion visitors in its history, more than 180,000,000 registered users to date, an average of 50 million daily visits, and to account for approximately four percent of the total traffic on the Internet.

What's the problem?

According to a Grand Jury indictment filed Jan 5, 2012, Kim Dotcom and his pals were members of a "Mega Conspiracy"; alleged to be:"a worldwide criminal organization whose members engaged in criminal copyright infringement and money laundering on a massive scale with estimated harm to copyright holders well in excess of [US]$500,000,000 and reported income in excess of [US]$175,000,000.

There will hopefully be a lot more detail forthcoming as to how those numbers are calculated.

The specific counts against Kim Dotcom and his pals include:

  • Conspiracy to commit racketeering
  • Conspiracy to commit copyright infringement
  • Conspiracy to commit money laundering
  • Criminal copyright infringement by distributing
  • Criminal copyright infringement by electronic means

A subsequent indictment filed in February claims that the Megaupload site had 66.6 million registered users as of January 2012 and just under 10 percent had ever uploaded a single file, suggesting most people used the site only to download infringing material. The new indictment also accuses the group of taking copyrighted material from sites such as Google's YouTube video service for use on Megaupload websites. 

Conspiracy to commit copyright infringement

The conspiracy count makes for the most interesting reading. There is a lot of material in the original indictment, and further material expected. Some of the more interesting allegations are set out below.

1. Reproducing copyright works

The Mega Conspiracy operated a few websites. One of these, called Megavideo.com, was for users who did not want to download whole copies of content. They could stream them. Just like YouTube. In fact, exactly like YouTube. The Mega Conspiracy is accused of reproducing copyrighted works directly from YouTube.com.

One of the intercepted emails between conspirators Bram van der Kolk and Mathias Ortmann reads:

Do we have a server available to continue downloading of the YouTube's vids? ... Kim just mentioned again that this has really priority." [sic]

2. Reward payments

The Mega Conspiracy is alleged to have provided financial incentives for users to upload infringing copies of popular copyrighted works. The Conspiracy made payments to uploaders who were known to have uploaded infringing copies of coprighted works.

Bram van der Kolk commented on one of the users deemed eligible for payment as follows:

Our old famous number one on MU, still some illegal files but I think he deserves a payment.

3. Failure to remove

Members of the Mega Conspiracy are accused of failing to delete infringing copies of copyrighted works from computer servers that they controlled, even when they were aware of the infringing material or the removal was specifically requested by the copyright holder.

There's this email from Kim Dotcom to Mathias Ortmann:

Never delete files from private requests like this. I hope your current automated process catches such cases.

And there's this one from Dotcom to van der Kolk, Ortmann and Bencko:

I told you many times not to delete links that are reported in batches of thousands from insignificant sources. I would say that those infringement reports from MEXICO of "14,000" links would fall into that category. And the fact that we lost significant revenue because of it justifies my reaction.

And this one:

In the future please do not delete thousands of links at ones [sic] from a single source unless it comes from a major organization in the US.

Court appearances

Alleged Mega Conspiracy members Kim Dotcom, Bram van der Kolk, Finn Batato and Mathias Ortmann were initially held in custody awaiting extradition to the United States. All are now out on bail. Dotcom was released under the usual conditions that he wear an electronic bracelet, that he travel no more than 80km from his home and that he not consume or possess illicit drugs. Two of the more interesting conditions are that he has no internet access and helicopter visits are banned.

Immediately before his arrest, Kim Dotcom managed to achieve the Number 1 ranking in Call of Duty: Modern Warfare 3. Playing under the gamertag MEGARACER, he is understood to have clocked up 185,353 kills after a mammoth 707 hours playing time. The session that finally took him to number 1 is reported to have lasted well over 7 hours. Since his incarceration he has dropped from the number 1 spot. His bail conditions prevent him from accessing the internet so he is unlikely to regain his crown.

During the arrest Dotcom and his bodyguard Wayne Tempero were found in a safe room together. The bodyguard originally faced three firearms charges. Police have dropped one of the charges involving unlawfully possessing a semi-automatic shotgun. Tempero has elected trial by jury for the other two charges involving possession of a pistol for an unlawful purpose.

The United States Government has filed extradition papers with the North Shore District Court naming Dotcom and his three associates. We expect the extradition hearing to be sometime in August this year. The extradition process will highlight the complex interaction between the criminal provisions of the New Zealand Copyright Act 1994, the New Zealand Extradition Act 1999 and a 1970 Treaty on Extradition between the USA and New Zealand.

The Ripple Effect

It has been interesting to watch the effect of Megaupload-related events on other cyber locker sites.

Filesonic has changed its policy. It has now disabled all sharing functionality. Account holders are able to access only those files they have uploaded themselves. Filesonic is making it clear, perhaps to US prosecutors, that it is primarily a file locker site rather than a file sharing site.

The Motion Picture Association of America filed a copyright lawsuit over a year ago against a cyberlocker. File-hosting service Hotfile, according to the MPAA, has made a business out of offering a stash box for people to store their pirated movies. Perhaps emboldened by the Megaupload case, the MPAA now wants the judge to make a quick summary judgement in the case, and rule against Hotfile due to its similarities to Megaupload.

And so it continues...

Out on bail, the latest news from Kim Dotcom is him negotiating with the US Department of Justice to reunite his users with their lost personal data.  Apparently many US government officials were Megaupload users. The plot thickens.