Megaupload.com shut down; Four Arrested In New Zealand

Four people have been arrested by police in New Zealand after Megaupload.com was shut down by US authorities and its operators indicted for copyright infringements charges, racketeering and money laundering (the last two appear to amount to running an criminal business). The arrestees include site founder Kim Dotcom. (Campbell Live reported on Dotcom, formerly know as Schitz, last year.) Assets including a luxury car and financial accounts have been seized by NZ authorities.

[Update, 4:40pm NZST: The four defendants appeared in court this afternoon and were remanded in custody.]

The US Department of Justice says it has executed over 20 search warrants in 9 countries, seizing $50 million in assets. The law under which the NZ arrests were performed is likely to be s20, Part 3 of the Extradition Act (h/t Graeme Edgeler, Rick Shera).

Megaupload.com describes itself as "The leading online storage and file delivery service". Reportedly the Internet's 13th most popular website, allows users to upload files for public download and offers users rewards for popular files. The site has been criticised by entertainment industry groups for encouraging copyright infringement. The indictment accuses the "Mega Conspiracy" of knowingly hosting a large number of copyright files.

Scoop has a copy of the US Grand Jury indictment here. The indictment quotes evidence suggesting Megauplaod knowingly rewarded users for infringing content and avoided acting on takedown requests (excerpts here).

An Ars Technica analysis spoke to law professor James Grimmelman of NYU: "If proven at trial, there's easily enough in the indictment to prove criminal copyright infringement many times over. But much of what the indictment details are legitimate business strategies many websites use to increase their traffic and revenues: offering premium subscriptions, running ads, rewarding active users. "I hope that if this case goes to trial and results in convictions, that the court will be careful in sorting out just what Megaupload did that crossed the line of criminality."

FBI Statement

The indictment alleges that the criminal enterprise is led by Kim Dotcom, aka Kim Schmitz, and Kim Tim Jim Vestor, 37, a resident of both Hong Kong and New Zealand...

The indictment states that the conspirators conducted their illegal operation using a business model expressly designed to promote uploading of the most popular copyrighted works for many millions of users to download...

The indictment charges the defendants with conspiring to launder money by paying users through the sites’ uploader reward program and paying companies to host the infringing content. More>>

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New Zealand Police Statement

The four arrests in the Auckland area today are part of an operation led by the US Department of Justice targeting large scale criminal copyright infringement and money laundering around the world.

The arrests, carried out by the Organised & Financial Crime Agency New Zealand (OFCANZ) and New Zealand Police, follow a mutual legal assistance request from the United States to arrest of individuals for the purpose of extradition...

Those arrested have German, Dutch and Finnish citizenship. Some are resident in New Zealand.

All will appear in the North Shore District Court this afternoon.

Assets have been seized including luxury cars with an estimated total value of up to NZ$6m. These include a Rolls Royce Phantom Drophead Coupe valued at over NZ$500,000. Over NZ$10m has also been seized from NZ financial institutions. These have been secured by New Zealand’s Official Assignee pending the outcome of legal proceedings. More>>

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The Wall Street Journal Reports that "Investigators said there was no connection between arrests in their two-year investigation and the political firestorm that erupted this week over a pending vote on the Stop Online Piracy Act."

Scoop noted that the the US Department of Justice website was unavailable when this article was originally posted. The hacker group Anonymous claims to have taken out the DoJ website and the Universal Music site within 15 minutes of the annoucement. They have now added the recordin industry site riaa.org and .

Megaupload has also recently been the subject of a smaller copyright over its "Mega Song" video. The promotional video feature an number of popular music artists, some of whom were signed to Universal Music. Universal attempted to use a copyright claim to removed the video from YouTube, and also to suppress an Internet tech news report on the subject.

Links:
Scanned document on Scribd: Mega Indictment
BBC News - Megaupload file-sharing site shut down
FBI Charges Seven With Online Piracy - WSJ.com
The Associated Press: APNewsBreak: Feds shut down file-sharing website
Analysis:
Ars Technica: Why the feds smashed Megaupload
Tech Liberty NZ: MegaUpload arrests in New Zealand

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