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Chronic: Megalife of Kim Dotcom

Posted: February 3rd, 2012 | Author: | Filed under: Chronic | Tags: | 11 Comments »

Megaupload Kim Dotcom

Since the shutdown of Megaupload, stories have eased out about the life and exploits of the company’s larger-than-life founder, the self-styled ‘Dr. Evil’ of file sharing, Kim Dotcom.

The man once known as Kim Schmitz, Kimble, Kim Tim Jim Vestor, and most recently Kim Dotcom, is now awaiting extradition from New Zealand to face charges of conspiracy, money laundering and copyright infringement crimes in the US. His life has enveloped his all of the hype and bluster that echoes the worst of the dot-com bubble. Schmitz has continued living the life of a 1990′s dotcom scammer, long after the bubble burst.

In 2001, the Telegraph described Schmitz as “a PR man’s nightmare, but a journalist’s dream.”

Megaupload Kim Dotcom Refused Bail - Private Garage

Schmitz recently wrote that his colour-filled past is far behind him now, he’s a family man, happy to meet the neighbors for coffee. But when New Zealand police arrived en masse at his mansion outside Auckland, in sleepy New Zealand last week, Dotcom’s new-found lily whiteness dissipated quickly, his past came crashing down around him, a stark reminder that the past is never far behind you.

Megaupload Kim Dotcom Refused Bail - Police RaidOf the raid police said in a In a statement, that officers cut their way through various locks and then into the home’s safe room, where Dotcom was reportedly standing close to a sawed-off shotgun, officers took him into custody.

Worldwide raids, in which 100′s of servers were seized, 100′s of law enforcement officers raiding homes and offices related to Megaupload and Schmitz around the globe, seizing property including high performance vehicles, abruptly ending the luxury lifestyle of Schmitz and his cohorts.

All adding another layer to the ever growing legend of Dotcom, a legend that Schmitz has been growing since he was a teenager: God of Hackers, Midas Touch, Kimble. Venture Beat has Dotcom listed as the No1 Modern Warfare 3 multiplayer, oops, even that status has slipped to No2 while this is being penned.

Kim Dotcom - New Zealand Mansion

Since the early 1990′s Dotcom has gone out of his way to put himself at the center of media attention. He’s certainly has it now.

But who is Kim Dotcom?

Kim Schmitz

Born in Kiel, Germany to a Finnish mother – source of his dual citizenship – Schmitz has made a career of being larger than life. In the early 1990s, Schmitz used the little hacker cred he’d grown and the worlds growing paranoia of hackers and phreakers to launch a media-powered cyber-security career. Schmitz got his first shot at media stardom in 1992, when he was interviewed by the German press and was subsequently featured in a  Forbes article on the “computer hacker crime wave.” Schmitz took advantage of the complete lack of technical credibility of reporters and the growing “hacker mystique” to create a sexier, more dangerous version of himself—if not James Bond, then Dr. No.

Giving his hacker handle “Kimble” – which he later claimed was taken from the name of the main character in the 1993 film The Fugitive - as well as claiming to be the leader of an international hacker group – Dope – Schmitz said he had hacked hundreds of US companies’ PBX systems and was selling the access codes at $200 a pop, bragging that “every PBX is an open door to me.” He also claimed to have developed an encrypted phone that could not be tapped, and to have sold a hundred of them.

In a 2001 interview with the Telegraph, Schmitz claimed to have hacked Citibank and transferred $20 million to Greenpeace, a claim refuted by Greenpeace. Schmitz also claimed to have hacked NASA and said that he had accessed Pentagon systems, reading top-secret information on Saddam Hussein during the Gulf War.

There’s no record to substantiate most of this; perhaps some of it is true. What he did do was steal phone calling card codes and conduct a premium number fraud similar to the recent rash of Filipino phreaking frauds. He bought stolen phone card account information from American hackers. After setting up premium toll chat lines in Hong Kong and in the Caribbean, he used a “war dialer” program to call the lines using the stolen card numbers—ringing up €61,000 in ill-gained profits.

Schmitz was also playing pirate in other ways. Andreas Bogk, a member of the Chaos Computer Club, recently told the Wall Street Journal that Schmitz set up a computer system for the uploading and downloading of pirated PC software, charging people for access. (Schmitz exposed the scheme in an interview with a German television news program, and it was subsequently shut down by Deutsche Telekom.)

Schmitz’s efforts to branch into the “legit” world of security consulting with his security company Data Protect initially backfired by exposing his real identity—and by allowing it to be connected to his hacker credentials. In March of 1994, he was arrested by police for trafficking in stolen phone calling card numbers. He was held in custody for a month, then arrested again on additional hacking charges shortly afterward—and again released. In 1998, he was convicted of 11 counts of computer fraud, 10 counts of data espionage, and an assortment of other charges. He received a two-year suspended sentence—because, at just 20, he was declared “under age” at the time the crimes were committed.

But Schmitz used the notoriety to boost his security business. He soon landed a security contract for Data Protect with the airline Lufthansa by demonstrating an apparent security vulnerability—though according to claims by others in the German hacking community, his connection to the airline was thanks to collaboration with an insider there, and to the hacking skills of an accomplice.

The influx of cash began to fuel Schmitz’s fantasy fulfillment engine, funding his love of fast cars and outrageous antics. He promoted his new bad-boy rich hacker genius image through a bizarre Flash movie called Kimble, Special Agent, in which his cartoon alter-ego drives a “Megacar” and then a “Megaboat” before breaking into Bill Gates’ compound and riddling the wall behind Gates with a machine gun (spelling out “Linux” with bullet holes). The cartoon was the first public demonstration of Schmitz’s obsession with all things Mega.

Rise, Fall, Rise, Fall

A year after the slap on the wrist, Schmitz shifted his focus from phone fraud to Internet start-ups. Almost from the beginning, he made an effort to portray himself as someone who was Germany’s answer to Silicon Valley—even if he was closer to Pets.com than to Yahoo.

His first effort tied together two of the great loves of his life: the Internet and expensive cars. Schmitz and Data Protect led the development of a real Megacar, an Internet-connected luxury car system with its own Pentium III Windows NT on-board computer, router, multi-camera video conferencing system, and 17-inch display. To get the broadband bandwidth required, the car had 16 multiplexed GSM cellular connections.The sticker price started at $90,000.

While it went nowhere, the press it received helped raise the profile of Data Protect—and of Schmitz. Schmitz was also making other efforts to create his persona. In 1999, according to New Zealand’s Investigate magazine(PDF), he was spotted at the airport in Munich getting his picture taken inside parked airplanes, which he then used to suggest that he owned them.

In 2000, Schmitz sold an 80 percent stake in Data Protect to the German conglomerate TÜV Rheinland, which bought the company for its “in-depth network expertise.” Schmitz held the remaining stake through his new holding company, Kimvestor.

Flush with at least some cash, Schmitz was quick to burn some of it by waving his own particular brand of freak flag. He hired a German centerfold, a collection of other actors, a film crew, and fast car aficionados for a self-produced film called Kimble Goes Monaco—a road movie about a lavish trip to Monaco, including a cruise on a rented yacht. The movie was punctuated with Schmitz playing with expensive toys, and featured a bizarre Bill-Gates-is-spying-on-me subplot.

Outlandish Claims

While Schmitz reveled in the attention, it wasn’t long before TÜV was wondering what, exactly, it had bought. First, there was LetsBuyIt.com, a failing Internet retail site. In January 2001, as the dot-com crash was starting to gain momentum, LetsBuyIt was close to bankruptcy. Schmitz bought 375,000 euros in the company’s shares—and then announced he was preparing to invest an additional 50 million Euros. “I’m completely convinced LetsBuyIt can reach profitability despite its current problems,” he told the Guardian.

The news hit the market, and the stock price of LetsBuyIt surged. Schmitz cashed out, making a profit of €1.5 million. Perhaps Schmitz was just ignorant of the legal ramifications of what he had done— insider trading wasn’t even a crime in Germany until 1995.

Regardless, he didn’t waste time rolling the money into building his persona—part of the profit was burned buying his Mercedes Brabus EV12 Megacar that April, in which he finished first in the 2001 Gumball 3000 road rally.

But as an investigation began into Schmitz’s shady investment strategy, another pet project was getting ready to crater. Schmitz had launched Monkey AG and Monkeybank, an e-payment company with venture capital from German private equity company BMP (which held a 35 percent stake). Monkey also shared the address, and most of the employees, of Data Protect—which was owned by TÜV.

By June of 2001, BMP and TÜV went into damage control mode, cutting Schmitz’s management involvement in Monkey and the rest of the companies. “Everything that has grown up around Mr. Schmitz is, to say the least, somewhat dubious,” TÜV spokesman Tobias Kerchoff told the German business site Handelsblatt.com. And there was plenty of reason for that dubiousness: somewhere in the confusion, Schmitz got €280,000 in the form of an unsecured loan to Kimvestor. He would later claim to have been “dazzled,” unaware that he would be unable to repay the loan.

In the meantime, Schmitz was busy trying to brush up on his hacker cred to improve his Dr. Evil image. In the wake of the September 11, attacks, he claimed to be launching a group called Young Intelligent Hackers Against Terrorism (YIHAT), and to have hacked Sudanese bank accounts belonging to Osama Bin Laden. (He also offered a $10 million reward for information leading to Osama’s capture on his now-defunct kimble.org site.)

But the pressure was mounting. In September of 2001, he claimed his net worth was $100 million. By November, his companies were all circling the drain. The hacker community had turned on him—one hacker, with the moniker of Fluffy Bunny, had defaced his site and the site of YIHAT.

With insider trading charges pending over LetsBuyIt, Schmitz decided it was time to lay low (by his standards); “in fear for his life,” he fled to Thailand in January of 2002.

Kim Schmitz aka Kimble, the founder of a group which made unsubstantiated claims to have hacked a Sudanese bank with /bin/laden accounts, has fled the country in fear of his life.

At least that’s what the man himself would have us believe from a farewell letter on his site which shows, if nothing else, that Kimble is not afraid to sing his own praises.

The “500-million-mark” man, “super brain” and “Internet entrepreneur” was wrongly made out to be a “braggart” and “fraud” by people out to destroy his vision, he would have us believe. The authorities are unable to protect him against kidnap or death threats so he’s decided to take his ego elsewhere.

There’s no mention of reported financial problems and, sadly, Kimble’s site has also been stripped of pictures of him and his mates flying in private jets to exotic locations with a bevvy of busty strumpets.

It’s not clear what his plans are or where Schmitz is at the moment, and he’s proving difficult to track down.

In January 2002, CNN reported that the German finance community, and Letsbuyit.com which he reportedly helped by offering to invest $40 million early last year when it was close to collapse, are unfazed by Schmitz’s exile.

The hacking community will be hopeful that he’s disappeared for good. Schmitz’s self-created legend of hacking proficiency, based on a little fact combined with tasty bits from media interviews and movies, as this article makes all too clear, raised hackles in the community.

After the September 11 attacks, Schmitz claimed to have created an elite squad of cyber ninjas called YIHAT (Young Intelligent Hackers Against Terrorism) whose goal was “eliminating the electronic foundations of terrorist activities worldwide”.

Last October Schmitz claimed that his YIHAT guard had obtained data on accounts held by members of Al Qaeda, including bin Laden, held at the AlShamal Islamic Bank in Sudan, but he offered not one shred of proof.

Days later Yihat was re-christened Young IDIOTIC haxOrz and Terrorists after an attack on its kill.net Web site by infamous hacker Fluffy Bunny.

Which say’s it all really. ®

Since we last looked, Schmitz has put up a fake headstone on his site announcing his death on Monday, which will be his 28th birthday. He’s even put up a countdown clock and invited people to see his “death” live on the site. Really is there no end to this man’s posturing?

A story in Germany’s Der Spigel suggests Schmitz has been arrested in Thailand. Here’s a translation from the original German, with thanks to all the readers who submitted it:

The End of the Road

Kim Schmitz Arrested in Thailand

Whatever he planned next, it will never materialise: Kim “Kimble” Schmitz has been arrested in Thailand. The ‘King of the Hackers’ has been accused of insider dealing, by which he allegedly made 1.5 million euros.

Munich computer expert Schmitz, sought internationally for his fraudulent insider dealing, was apprehended in Bangkok. The public prosecutor from Munich I confirmed on Friday a report to that effect by ‘Teleboerse Online’. The 27 year-old was accused of using insider knowledge to buy shares for 375,000 euros, then selling them off shortly afterwards for 1.5 million euros.

Now we must wait to see how this develops, and when the accused will be handed over to Germany, said a representative of the public prosecutor’s office. On the advice of the state supervisory office for bond trading, the Munich authorities have initiated inquiries and obtained the arrest warrant through Munich’s law courts.

Schmitz is regarded as an enigmatic figure. He became known in Munich as a computer hacker and later sold his knowledge of security holes to companies.

Even now he is still ensuring sensation with one of his abstruse publicity tricks: on his Web site he is advertising his suicide on Monday – or at least his crossing “to a new world”.

On his website, he hinted at possible suicide, saying he would be crossing “to a new world,” Hale-Bopp cult style. But instead of offing himself, he declared that he wanted to be known as “King Kimble the First, Ruler of the Kimpire”—a label he would apply to his future projects. (It’s listed as his title on LinkedIn.)

Kim Dotcom Linkedin

As it turned out, Thailand wasn’t happy to see him. He was promptly arrested and fast-track deported to Germany to stand trial. However, the few nights in a Thai jail turned out to be the worst of it, as fears of prison in Germany were unfounded—he was sentenced to 20 months probation and slapped with a €100,000 fine. In 2003, he pled guilty to embezzlement charges over the Monkey “loan” and received another two years of probation.

After the law’s repeated lashes with a wet noodle, Schmitz left Germany and moved to Hong Kong to start the next level of Mega-insanity.

Chronic Megalife of Kim Dotcom - Photograph via Reuters

Mission Kimpossible

Once free of the innovation-squelching German laws of finance and regulation, Schmitz set up a network of interlinked companies. He registered Kimpire Limited in December 2002, soon after moving to Hong Kong. The holding company’s first offspring was Trendax, “the money making machine”—an allegedly artificial intelligence-driven hedge fund that mostly got attention for its Flash-heavy homepage. For a $50,000 investment, the fund offered the promise of untold riches—an annual return of at least 25 percent on investments—generated through “a complex combination of sophisticated technical analysis, real-time content analysis of news feeds, multi-dimensional statistical analysis and advanced proprietary mathematical techniques.”

Schmitz apparently invested $250,000 into the company—much of it spent on the site design. Trendax’s registered address is The Lee Gardens, a “heaven of luxury” in Hong Kong with high-end retail establishments like Louis Vuitton and Hermés. However, the address given within Lee Gardens—the 45th floor—is occupied by Regus, a “virtual office” company. And as New Zealand’s Investigate Magazine discovered, the fax line given for the company was a shared one.

Trendax was registered as a business in Hong Kong in February 2003, but never registered with the SEC or with Hong Kong’s Securities and Futures Commission. Despite Schmitz’s claims that the AI had managed to increase the value of the fund by 130 percent from 2000 (before the company had even hired programmers) to 2003—during a period when the Dow Jones dropped 25 percent—the company never was allowed to accept investments and conduct trades, at least legally.

At about the same time he was trying to get investors to bite on Trendax, Schmitz was building a virtual business empire by recycling his old company names in Hong Kong. In February of 2003, according to Hong Kong government company registry data obtained by Ars—at the same time he registered Trendax— he set up the business entity Data Protect Limited, the company that would later become Megaupload. He also registered Kimvestor Limited and in March registered Monkey Limited. Kimvestor and Monkey shared the same virtual address with Trendax; Data Protect (and later Megaupload) had a post-office box as a point of contact.

Whatever money was actually being made at this point is unclear, but Schmitz continued to live in grand style—or at least keep up the appearance of it. He kept adding to his collection of exotic and high-end cars, and also ran into trouble across Europe for his involvement in illegal street racing. He returned to race in the Gumball 3000 in 2003, pumping up his “Dr. Evil” image by bragging about bribing Moroccan police to stop a competitor—and then bumping that car when he discovered it was ahead of him.

During all these exploits, Schmitz was using his Web presence to attempt to recruit volunteers to power his new Kimpire, offering promises of future wealth to those who made it to his “Hall of Fame,” begging on his kimble.org site for translation services, Web referrals, and even free Web hosting:

Every Kimpire profit will be shared between everybody who made it to the Hall of Fame. If you make substantial contributions to the Kimpire, your name will appear in the Hall of Fame. Earn respect, friendship, wisdom and money with your support for the Kimpire. The Kimpire can make you rich and the other way around. The Kimpire will rule the world, so better be a part of it ;-)… If you know cool words that include “KIM”, send them. Some examples: Kimpire, Kimply the Best, Kimasutra, Kimmercial, Kimpany, Kimvestor, Kim Kong, Mission Kimpossible, Kimsalabim, etc. The best words will make it to the upcoming release of the Kimpire Lexicon.

A “Kimpire” might sound ridiculous, but it was about to become a reality—thanks to file hosting.

Mega Millions

All this was prelude to what would become Schmitz’s biggest actual moneymaking scheme—the file-sharing business. To get the project rolling, Schmitz decided it was time to make a full break from his highly dubious reputation. In 2005, the name of Data Protect was changed to Megaupload, and Schmitz registered yet another company—Vestor Limited—as its owner.

That wasn’t the only obscuring going on. About the same time, Schmitz officially changed his legal name to Kim Dotcom—and used his Finnish heritage to register a passport under the name “Kim Tim Jim Vestor” as well, using the address of a step-sibling in Turku, Finland. The Vestor persona was used in the creation of Vestor Limited. It wasn’t until 2007 that Kim Dotcom was revealed to be connected in any way to Megaupload, and his role as founder wasn’t revealed until 2011 by the company.

But as Megaupload’s profits mounted—both from legitimate use and from the alleged piracy of content ranging from music to porn—Dotcom’s 68 percent share of the business finally made him the sort of money he had always acted like he had.

Megaupload lives to fight another day. In November 2011, Cnet reported that Megaupload had been accused of helping millions around the world to store pirated videos, music, and software, has settled a copyright suit filed against it in January by Perfect 10, a porn studio with a long history of accusing tech companies of copyright violations.

Terms of the settlement weren’t disclosed and representatives from the two companies did not respond to CNET’s requests for comment. Megaupload is the parent company of multiple services, such as Megaporn, MegaVideo and MegaPix.

The company confirmed that it is operated with the support of founder Kim Schmitz, a man famous for his lavish lifestyle as well as his former brushes with the law. Schmitz is a former illegal street racer and convicted credit-card fraudster.

The only detail made public about the settlement between Megaupload and Perfect 10 involved a joint request they made to the court. U.S. District Court Judge Irma Gonzalez of the Southern District of California that as part of the settlement they wanted her to vacate a decision made in July that favored Perfect 10. Gonzalez refused a request by Megaupload to throw out Perfect 10′s claims that it was liable for direct and contributory copyright infringement. The judge found evidence that showed Perfect 10′s “allegations were adequate” for the case to move forward.

“Megaupload serves as more than a passive conduit and more than a mere ‘file storage’ company,” Gonzalez wrote in her July 26 decision. “It has created distinct Web sites presumably in an effort to streamline users access to different types of media. It encourages and in some cases pays its users to upload vast amounts of popular media through its rewards programs.”

The gist of those decisions is that service providers that qualify for the Digital Millennium Copyright Act’s safe harbor provisions don’t have to hunt down and remove pirated materials from their sites. This may not be the end of Megaupload’s copyright troubles, though. Megaupload was on a list of companies recently handed to the U.S. Trade Representative by the Recording Industry Association of America. The companies on the list are accused of profiting from piracy.

The US Government indictment goes after six individuals. the case is a major one, involving international cooperation between the US, Hong Kong, the Netherlands, the UK, Germany, Canada, Philippines and New Zealand. In addition to the arrests, 20 search warrants were executed in multiple countries.

Kim Dotcom US District Court

The US government, in its indictment against the Megaupload said that the company had raised US$175 million since its inception, most coming from users who paid for premium download accounts. The money was spent lavishly, by the time of the raid on Megaupload, Hong Kong police said that Schmitz had been renting an office in a luxury Hong Kong hotel suite at $HK100,000 /$US13,000)—perday.

Married with three children, Dotcom ehas been living in New Zealand since 2009, he apparently chose the land of the long white cloud to better enjoy his wealth and toys. He attempted to purchase a $NZ30 million/$US24 million mansion outside Auckland—and smoothed his path to residency through a NZ$10 million investment in government bonds, putting him into the “high investment” category for immigration. He donated heavily to the Christchurch earthquake relief fund and even paid for a half-million dollar fireworks display on New Year’s Eve 2011 in Auckland.

While waiting for the paperwork to clear, Dotcom arranged a lease of the desired Coatsville mansion from a company set up by the mansion’s previous owner, the founder of the “Christmas hamper” layaway business Chrisco. Dotcom’s lifestyle might have been on the lay-low, it was by no means subdued though:

• Megaupload spent $2.4 million on yacht rentals in June 2011 alone.

• The US government is after $175 million in assets, including 59 different bank accounts. Many of them Chinese. Two are from Citibank.

• The US is looking for at least 14 Benzes, a Predator statue, two 108 inch TVs, a Seadoo, a 1957 Cadillac, a Maserati, and a Mini Cooper.

• Kim owned a Rolls Royce Phantom with a license plate that read “GOD.” Some of the tags on his other cars included: GUILTY, STONED, GOOD, CEO, MAFIA, and HACKER.

Nate Anderson from Arstechnica writes:  Going after Megaupload, one of the most popular sites in the world and one that uses a surprising amount of corporate bandwidth, might seem a strange choice. (As an example of its scale, Megaupload controlled 525 servers in Virginia alone and had another 630 in the Netherlands—and many more around the world.) For years, the site has claimed to take down unauthorized content when notified by rightsholders. It has registered a DMCA agent with the US government. It has created an “abuse tool” and given rightsholders access. It has negotiated with companies like Universal Music Group about licensing content. And CEO Kim Dotcom sent this curious e-mail to PayPal in late 2011:

Our legal team in the US is currently preparing to sue some of our competitors and expose their criminal activity. We like to give you a heads up and advice [sic] you not to work with sites that are known to pay up loaders for pirated content. They are damaging the image and the existence of the file hosting industry (see what’s happening with the Protect IP Act). Look at Fileserve.com, Videobb.com, Filesonic.com, Wupload.com, Uploadstation.com. These sites pay everyone (no matter if the files are pirated or not) and have NO repeat infringer policy. And they are using PayPal to pay infringers.

But the government asserts that Megaupload merely wanted the veneer of legitimacy, while its employees knew full well that the site’s main use was to distribute infringing content. Indeed, the government points to numerous internal e-mails and chat logs from employees showing that they were aware of copyrighted material on the site and even shared it with each other. Because of this, the government says that the site does not qualify for a “safe harbor” of the kind that protected YouTube from Viacom’s $1 billion lawsuit.

For instance, the “abuse tool” allegedly does not remove the actual file being complained about by a rightsholder. Instead, it only removes a specific Web address linked to that file—but there might be hundreds of such addresses for popular content.

In addition, the government contends that everything about the site has been doctored to make it look more legitimate than it is. The “Top 100” download list does not “actually portray the most popular downloads,” say prosecutors, and they claim that Megaupload purposely offers no site-wide search engine as a way of concealing what people are storing and sharing through the site.

Megaupload employees apparently knew how the site was being used. When making payments through its “uploader rewards” program, employees sometimes looked through the material in those accounts first. “10+ Full popular DVD rips (split files), a few small porn movies, some software with keygenerators (warez),” said one of these notes. (The DMCA does not provide a “safe harbor” to sites who have actual knowledge of infringing material and do nothing about it.)

In a 2008 chat, one employee noted that “we have a funny business… modern days [sic] pirates :),” to which the reply was, “we’re not pirates, we’re just providing shipping servies [sic] to pirates :).”

Employees send each other e-mails saying things like, “can u pls get me some links to the series called ‘Seinfeld’ from MU [Megaupload],” since some employees did have access to a private internal search engine.

Employees even allegedly uploaded content themselves, such as a BBC Earth episode uploaded in 2008.

Other messages appear to indicate that employees knew how important copyrighted content was to their business. Content owners had a specific number of takedown requests they could make each day; in 2009, for instance, Time Warner was allowed to use the abuse tool to remove 2,500 links per day. When the company requested an increase, one employee suggested that “we can afford to be cooperative at current growth levels”— implying that if growth had not been so robust, takedowns should be limited. Kim Dotcom approved an increase to 5,000 takedowns a day.

Employees also had access to analytics. One report showed that a specific linking site had “produce[d] 164,214 visits to Megaupload for a download of the copyrighted CD/DVD burning software package Nero Suite 10. The software package had the suggested retail price of $99.” The government’s conclusion: Megaupload knew what was happening and did little to stop it.

Yet the indictment seems odd in some ways. When Viacom made many of the same charges against YouTube, it didn’t go to the government and try to get Eric Schmidt or Chad Hurley arrested.

It’s also full of strange non-sequiturs, such as the charge that “on or about November 10, 2011, a member of the Mega Conspiracy made a transfer of $185,000 to further an advertising campaign for Megaupload.com involved a musical recording and a video.” So?

The money probably paid for a video that infuriated the RIAA by including major artists who support Megaupload. Megaupload later filed claims in US courts, trying to save the video, which it says was entirely legal, from takedown requests. (The RIAA has long said the site operators “thumb their noses at international laws, all while pocketing significant advertising revenues from trafficking in free, unlicensed copyrighted materials.”)

Given that the site was already using US courts to file actions; given that the government had Megaupload e-mails talking about using US lawyers to file cases against other “pirate” sites; given that the site did at least take down content and built an abuse tool; and given that big-name artists support the site, the severity of the government’s reaction is surprising.

There’s no doubt that the indictment makes Megaupload look bad, though, and we’re quite curious to see what comes of the case—especially once the site has a chance to respond.

Law professor James Grimmelmann of New York Law School tells Ars, “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.”

The MPAA doesn’t have any doubts, though. “By all estimates, Megaupload.com is the largest and most active criminally operated website targeting creative content in the world,” it said in a statement. “This criminal case, more than two years in development, shows that law enforcement can take strong action to protect American intellectual property stolen through sites housed in the United States.”

Downfall and Demise

After its demise, Megaupload’s website seemed to have reappeared, accessible via an IP address posted on forums and IRC channels. But Torrentfreak warns that such addresses are more than likely imposters, scams or both. The real Megaupload is trying to get back online though, even while their execs are hanging out inside a cell. Whatever does ultimately happens to this odd piracy playground, however, is sure to play out in an interesting way.

In the meantime, he erected a sign at the gate to the mansion’s property declaring it to be “Dotcom Mansion,” and started strewing the property with his toys—including cars with the now-infamous collection of vanity plates.

But the warmth of his welcome waned quickly once government ministers started to dig into his past. As Megaupload was fueling the entertainment industry’s push for SOPA and PIPA in the US, Dotcom was told he couldn’t actually buy the mansion he had leased because of his prior convictions in Germany and his deportation from Thailand. Dotcom called the decision by New Zealand finance minister Simon Power and land information minister Maurice Williams “small-minded and unreasonable,” considering that he had already been approved for residency.

Neighbors too were wary. The New Zealand Herald obtained an e-mail sent from Dotcom to his new neighbors in which he tries to reassure them about his past through humor. “First of all let me assure you that having a criminal Neighbor like me comes with benefits,” he writes. “Our newly opened local money laundering facility can help you with your tax fraud optimization. Our network of international insiders can provide you with valuable stock tips.”

But, Dotcom goes on to say, he is now a changed man.

“In all seriousness: my wife, two kids and myself love New Zealand and ‘We come in peace.’ 15 years ago I was a hacker and 10 years ago I was convicted for insider trading. Hardly the kind of crimes you need to start a witch hunt for. Since then I have been a good boy, my criminal records have been cleared, and I created a successful Internet company that employs 100+ people. All the media has to report are old news. Why? Because I have chosen to avoid the media. Just look what the media did to this Neighborhood. Scary.”

The local change of mood apparently caused Dotcom’s wife Mona to return to Hong Kong to deliver another child—a move that probably turned out to be for the best, given the New Zealand police helicopters that were about to descend on the mansion.

Dotcom now awaits an extradition hearing in a New Zealand jail after being denied bail during an initial hearing. He strongly denies all allegations against him.

  • The DMCA compliant tool Megaupload had installed to help major US institutions pull copyrighted files from Mega servers was, of course, flawed. If a user uploaded something like, say, The Hangover, Megaupload would search its servers for a matching file. It would delete the link submitted despite knowing about tens or hundreds or even thousands of other links to the same file. Basically it was a super clever fuck you to the copyright holder.
  • The US government is clinging to evidence that Megaupload’s owner, Kim Dotcom, shared the song Nah by 50 Cent featuring Mobb Deep in 2006. Seriously. This is one of their major claims. On or about December 3, 2006, KIM DOTCOM distributed a Megaupload.com link to a music file entitled 05-50_cent_feat._mobb_deep-nah-c4.mp3.
  • Megaupload sought to download and re-upload all of YouTube’s content onto its own site, Megavideo, to mask the pirated content that lurked beneath its front page.
  • Mega Conspiracy has paid more than $65 million to hosting providers around the world for computer leasing, hosting, bandwidth… Mega Conspiracy affirmatively chose to financially reward specific uploaders of infringing copies of copyrighted content.
  • Thanks to their rewards program for loyal uploaders, they paid out 55k to a user who had 5,845 files of Vietnamese content, at least 10 DVD rips, some porn, and (what looked like) an Italian TV series.

The site sported 50 million daily visitors and accounted for a whopping 4% of all internet traffic, had been on the hit list of music industry execs and the U.S. government for some time. But with an executive pulled straight from the very industry it threatens, endorsements from A-list celebrities and $2.4 million spent on yachts in a single month, Megaupload is not your average piracy haven. Behind the curtain, it’s a bizarre scene, like something out of a 90’s gangsta rap video.

That “insider” executive, at least according to Megaupload, is famed rap producer Swizz Beatz, who was listed as Megaupload’s CEO in the days leading up to the site being taken down by law enforcement. The true nature of his involvement with the site is still a mystery, though he’s not listed as an owner or even named in the indictment. Last year Beatz, aka Kasseem Dean, aka Mr. Alicia Keys, did join other music celebs like Mary J. Blige, Kanye and Will.i.am in singing the site’s praises, much to the chagrin of music distributor Universal Music Group, the prime instigator behind the DOJ’s recent raid.

UMG later filed a copyright complaint to force the video down despite written legal agreements from the musicians, only to be met with a lawsuit (pending) from Megaupload. Megaupload, whose US$39 million in assets have been frozen in Hong Kong, has reportedlyretained Robert Bennett, Bill Clinton’s high powered Washington attorney, for its upcoming trial.

Megaupload Shut-down, User Data Deleted and Kim Dotcom Refused Bail

Data from shut down cyberlocker site Megaupload users could start to be deleted as early as February 2, 2012.

Megaupload Shut-down, User Data Deleted and Kim Dotcom Refused Bail

The U.S. Attorney’s Office leading the prosecution of Hong Kong-based Megaupload and founder Kim Dotcom – aka Kim Schmitz – and his associates, told the Eastern District of Virginia court on Friday that the outside companies hosting Megaupload data — Carpathia Hosting and Cogent Communications — might begin deleting data on February 2, 2012.

After a multi-country investigation, the U.S. Justice Department and the FBI last week blocked access to the site and charged its operators with running an international organized criminal enterprise allegedly responsible for “massive worldwide online piracy” of numerous types of copyrighted works, including porn.

In a letter to the court, the government said it copied some data from the servers but did not physically take it, and after it has executed its search warrants, it has no right to access the data.

The prosecutors said that the servers are controlled by Carpathia and Cogent and issues about the future of the data must be resolved with them. The government said, “The execution of those search warrants [on the servers] has now been completed. The United States copied selected Mega Servers and copied selected data from some of the other Mega Servers, but did not remove any of the Mega Servers from the premises.

“Now that the United States has completed execution of its search warrants, the United States has no continuing right to access the Mega Servers. The Mega Servers are not in the actual or constructive custody or control of the United States, but remain at the premises controlled by, and currently under the control of, Carpathia and Cogent. Should the defendants wish to obtain independent access to the Mega Servers, or coordinate third-party access to data housed on Mega Servers, that issue must be resolved directly with Cogent or Carpathia. It is our understanding that the hosting companies may begin deleting the contents of the servers beginning as early as February 2, 2012.”

According to an AP report, Megaupload attorney Ira Rothken said Sunday that the government has frozen its money and that the company is working with prosecutors to try to keep the data from being erased.

He said at least 50 million Megaupload users have data in danger of being erased, and added that besides its customers, the data is important to Megaupload so it can defend itself in the legal case.

“We’re cautiously optimistic at this point that because the United States, as well as Megaupload, should have a common desire to protect consumers, that this type of agreement will get done,” he said.

Megaupload maintained that millions of users have not been able to access their personal data, that includes photos and documents since the government shut down.

Megaupload Kim Dotcom Refused Bail

Dotcom’s Bail Woes

January 26, 2012. Two of Kim Dotcom’s co-accused have been granted bail in New Zealand a day after the Megaupload boss was ordered to remain behind bars pending US attempts to extradite him for copyright piracy.

Judge David McNaughton, who denied Dotcom bail after deeming the internet tycoon a serious flight risk, said he was prepared to release co-accused Finn Batato and Bram van der Kolk subject to strict conditions.

He reserved until Friday a decision on bail for Mathias Ortmann, a fourth Megaupload executive arrested last week in a raid on the sprawling Dotcom mansion in Auckland.

McNaughton said Dutchman van der Kolk, Megaupload’s chief programmer, was in a different position to Dotcom, who legally changed his name from Kim Schmitz and has numerous bank accounts.

“There is no issue in Mr van der Kolk’s case of multiple identity or multiple passports, no connection to any firearms and… (no evidence) of access to any other funds,” he said in a written decision.

The judge said the evidence suggested Batato, a German national, was “a man of good character” who was unlikely to attempt to flee New Zealand.

Lawyers for Dotcom, who vigorously denies any wrongdoing, have said they will appeal against this week’s decision to keep him in custody while US authorities seek his extradition for “massive worldwide online piracy”.

The US Justice Department and FBI last week alleged Megaupload and associated sites generated more than $US175 million ($164 million) in criminal proceeds and cost copyright owners more than $500 million by offering pirated content.

Megaupload Shut-down Kim Dotcom Refused Bail

January 25, 2012. Megaupload founder Kim Dotcom has been denied bail in a New Zealand court, as US authorities seek his extradition on allegations of massive copyright theft.

Judge David McNaughton said he was concerned that Dotcom, who US authorities allege received $US42 million ($40 million) from his internet empire in 2010 alone, would flee the country if released on bail.

“With sufficient determination and financial resources, flight risk remains a real and serious possibility which I cannot discount,” he said in a written judgement.

Dotcom, who has been in custody since police raided his Auckland mansion last Friday but vigorously denies any wrongdoing, will be remanded in custody until February 22.

The German businessman is among seven people indicted by the US Justice Department and FBI accused of “massive worldwide online piracy of numerous types of copyrighted works, through Megaupload.com” and other sites.

They allegedly generated more than $US175 million ($167 million) in criminal proceeds and caused more than $US500 million ($477 million) in harm to copyright owners by offering pirated copies of movies, TV programs and other content.

The US charges Dotcom faces include money laundering and racketeering, which carries a potential 20-year jail term.

Dotcom’s lawyers say he will appeal the decision denying him bail in New Zealand’s High Court.

January 23, 2012. The founder of online file-sharing website Megaupload has argued in a New Zealand court that he is innocent of internet piracy and said authorities were trying to portray the blackest picture of him.

A judge has reserved his decision on whether to grant bail to Kim Dotcom ahead of an extradition hearing on charges of internet piracy and money laundering.

US authorities want the alleged internet pirate to remain in custody, fearing he is an extreme flight risk and might re-offend.

“Given the breadth of issues covered in this bail application and the seriousness of the issues, I am going to reserve my decision,” Judge David McNaughton said.

Dotcom, a German national, was arrested in Auckland last week over alleged copyright infringement and money-laundering.

His lawyer had argued for bail, saying he posed no threat of absconding or restarting his business.

“Mr Dotcom emphatically denies any criminal misconduct or wrongdoing and denies the existence of a mega conspiracy,” defence lawyer Paul Davison told the court.

But prosecutor Anne Toohey said Dotcom posed a flight risk “at the extreme end of the scale” because it was believed he had access to funds, could easily arrange transport, had multiple identities and had a history of fleeing criminal charges.

Mr Davison argued Dotcom’s passports had been seized, his funds frozen, he had cooperated with authorities and wanted to make New Zealand his permanent home.

US authorities want to extradite Dotcom on charges he masterminded a scheme that made more than $175 million in a few short years by copying and distributing music, movies and other copyrighted content without authorisation.

Megaupload’s lawyer has said the company simply offered online storage.

The court hearing comes as media reported that Dotcom ordered around $3 million of renovations to the sprawling mansion that he leased near Auckland, with its manicured lawns, fountains, pools, palm-lined paths and extensive security.

The case is being heard as the debate over online piracy reaches fever pitch in Washington where the US congress is trying to craft tougher legislation.

Lawmakers stopped anti-piracy legislation on Friday, postponing a critical vote in a victory for internet companies that staged a mass online protest against the fast-moving bills.

The movie and music industries want congress to crack down on internet piracy and content theft, but major internet companies, like Google and Facebook, have complained current drafts of the legislation would lead to censorship.

The situation reached fever-pitch last week when online encyclopaedia Wikipedia staged a 24-hour blackout in protest of drafted new legislation.

Critics of the Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA) quickly showed their opposition to the shutdown of Megaupload.com, with hackers attacking the public websites of the Justice Department, the world’s largest music company Universal Music, and the two big trade groups that represent the music and film industries.

US Gov Warning Megaupload Shut-down

Megaupload Shut-down

January 19, 2012. Megaupload.com has been shut down and its operators have been charged in the U.S. with running an international organized criminal enterprise allegedly responsible for “massive worldwide online piracy” of numerous types of copyrighted works, including porn.

The U.S. Justice Department and FBI announced the indictments today after a multi-agency, multi-country investigation. The agencies said Megaupload.com and other related sites generated more than $175 million in criminal proceeds and caused more than $500 million in harm to copyright owners.

“This action is among the largest criminal copyright cases ever brought by the U.S. and directly targets the misuse of a public content storage and distribution site to commit and facilitate intellectual property crime,” the agencies said in a joint statement.

The individuals and two corporations — Megaupload Ltd. and Vestor Ltd. —were indicted by a grand jury in Virginia on Jan. 5, the agencies said.

Charges include in engaging in a racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering and two substantive counts of criminal copyright infringement.

The individuals each face a maximum penalty of 20 years in prison on the charge of conspiracy to commit racketeering, five years in prison on the charge of conspiracy to commit copyright infringement, 20 years in prison on the charge of conspiracy to commit money laundering and five years in prison on each of the substantive charges of criminal copyright infringement.

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.

Dotcom founded Megaupload Ltd. and is the director and sole shareholder of Vestor Ltd., which has been used to hold his ownership interests in the Mega-affiliated sites, including Megarotic.com, Megaporn.com, Megavideo.com and Megaclick.com, the agencies said.

In addition, the following alleged employees of the alleged conspiracy were charged in the indictment, including Finn Batato, 38, a citizen and resident of Germany, who is the chief marketing officer; Julius Bencko, 35, a citizen and resident of Slovakia, who is the graphic designer; Sven Echternach, 39, a citizen and resident of Germany, who is the head of business development; and Mathias Ortmann, 40, a citizen of Germany and resident of both Germany and Hong Kong, who is the chief technical officer, co-founder and director.

Also charged were Andrus Nomm, 32, a citizen of Estonia and resident of both Turkey and Estonia, who is a software programmer and head of the development software division; and Bram van der Kolk, aka Bramos, 29, a Dutch citizen and resident of both the Netherlands and New Zealand, who oversees programming and the underlying network structure for the Mega conspiracy websites.

Dotcom, Batato, Ortmann and van der Kolk were arrested today in Auckland, New Zealand, by New Zealand authorities, who executed provisional arrest warrants requested by the U.S. Bencko, Echternach and Nomm remain at large.

Today, law enforcement also executed more than 20 search warrants in the U.S. and eight countries, seized approximately $50 million in assets, and targeted sites where Megaupload has servers in Ashburn, Va., Washington, the Netherlands and Canada.

In addition, the U.S. District Court at Alexandria, Va., ordered the seizure of 18 domain names associated with the alleged conspiracy.

According to the indictment, for more than five years the conspiracy has operated websites that unlawfully reproduce and distribute infringing copies of copyrighted works, including movies — often before their theatrical release — music, television programs, electronic books, and business and entertainment software on a massive scale.

The conspirators’ content hosting site, Megaupload.com, is advertised as having more than one billion visits to the site, more than 150 million registered users, 50 million daily visitors, and accounting for four percent of the total traffic on the Internet, the agencies said.

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 alleges that the site was structured to discourage the vast majority of its users from using Megaupload for long-term or personal storage by automatically deleting content that was not regularly downloaded.

The charged further allegedly offered a rewards program that would provide users with financial incentives to upload popular content and drive web traffic to the site, often through user-generated websites known as linking sites. They also allegedly paid users whom they specifically knew uploaded infringing content and publicized their links to users throughout the world.

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.

Megaupload currently is engaged in a lawsuit with Universal over the promotional video and Universal’s efforts to have it removed from YouTube.

In November, adult company Perfect 10 and Megaupload reached a settlement agreement in Megaload’s $5 million copyright infringement suit. Details of the settlement weren’t disclosed at the time.

Adult industry attorney Marc Randazza called the indictment “pretty damning.”

“If the government can prove these claims, which seem pretty difficult to refute, these guys are going to have an uphill defense,” Randazza told XBIZ. “I think a lot of content producers are going to be toasting this indictment tonight.”

In reaction to the government’s charges, Pink Visual’s Q Boyer told XBIZ that Megaupload’s business model has “always been a dangerous game to play.”

“[T]hey do things that could be construed as providing an incentive to commit piracy on the part of Megaupload’s users,” Boyer noted.

“This indictment underscores the importance of developing your business on a legally-sound model; if you don’t, no matter how popular your sites and services become, your empire can come crashing down in a heartbeat,” he said.

PornGuardian’s Dominic Ford called today’s announcement of the indictment a positive move for the adult entertainment industry, saying that file-sharing sites are the biggest facilitators of piracy.

“Our hope is their days are numbered,” Ford told XBIZ. “The indictment of MegaUpload is not only good for the industry, it is a clear warning to similar sites that this behavior will no longer be tolerated.

“At PornGuardian, we have recorded literally millions of infractions against MegaUpload and similar sites on behalf of our clients. In fact, while Megaupload is in the top five worst-offending sites, it is not the most egregious in terms of the adult industry. We are actively gathering evidence on these worst offenders that will be used in similar legal battles against them.

“It is very important to realize that pirates rely on these sites’ affiliate model to make money via piracy. A prolific pirate can earn up to $200,000 per year based solely on money coming from this filesharing sites. And they have no production costs because all the content is stolen. It is crucial that this practice of rewarding downloaders for popular files stops.”

The websites of the Justice Department and Universal Music Group, which had been involved in litigation with Megaupload, were allegedly taken down by hacker group Anonymous. The sites reportedly were attacked in response to the actions against Megaupload.

Gizmodo reported that, according to network data assembled by security vendor Palo Alto Networks, Megaupload usage accounted for 25 percent of the corporate network traffic it monitored. The security company monitored the gateways of 1,636 businesses worldwide and recorded traffic numbers over a week’s span. “The key point is that this is real network traffic, it’s not a survey. It’s not speculation on anyone’s part,” said Matt Keil, Palo Alto senior research analyst. The company did not break down how much of the material in file sharing involved adult content.

Kim Schmitz

WIKI

Kim Dotcom, born Kim Schmitz January 21, 1974 also known as Kimble and Kim Tim Jim Vestor, is a German-Finnish computer programmer and businessman who rose to prominence during the dot-com bubble and was convicted ofinsider trading and embezzlement in its aftermath. He is also known as the founder of Megaupload and its associated websites. He legally changed his surname to Dotcom circa 2005. On January 20, 2012, the New Zealand policeplaced him in custody under the charges of criminal copyright infringement in relation to his Megaupload website.

Early Career

As a teenager, Dotcom earned a reputation in his native Germany for cracking corporate PBX systems in the United States, and tried to parlay it into a career in data security. That effort led to his arrest on charges of using and selling stolen calling card numbers. In 1994, Dotcom founded a computer security company called DataProtect. In 1999, DataProtect and IVM engineering presented the “Megacar”, a Brabus-tuned Mercedes-Benz S-Class W220 which, among other features, had a Windows NT server, a 17.3″ SGI flat panel display and combined 16 GSM modules to provide mobile broadband Internet access.

In 1998, Dotcom was sentenced to a probationary sentence of two years for computer fraud and handling stolen goods.According to a report by News & Record, he had traded stolen calling card numbers he bought from hackers in the United States. He achieved early notoriety by being the subject of an advanced-for-its-time flash animation video called Kimble Special Agent. The name is a reference to Richard Kimble, the main character of the television series The Fugitive.

Dotcom later sold 80% of the shares of DataProtect to “TÜV Rheinland” in 2000, during the dot-com bubble. The former wentbankrupt at the time of the subsequent market crash in 2001.

He is known for his large frame, as he is 2 metres (6.6 ft) tall and weighs 130 kilograms (290 lb).

Insider Trading and Embezzlement

In 2001, Dotcom purchased $375,000 worth of shares of the nearly bankrupt company LetsBuyIt.com and subsequently announced his intention to invest €50 million in the company. Unknown to others, Dotcom did not have the funds available to invest, although the announcement caused the share value of LetsBuyIt.com to jump by nearly 300%. Dotcom quickly sold the shares and profited $1.5 million as a result.

Dotcom had also arranged and obtained an unsecured loan of €280,000 from Monkey AG, a company for which Dotcom had served as Chairman of the Board. The funds were to be paid to Kimvestor AG. As a result, both Monkey and Kimvestor went bankrupt. Dotcom expressed remorse, stating that he had been “dazzled” and had not recognized that he would be unable to repay the loans.

In January 2002, Dotcom was arrested in Bangkok, Thailand, deported to Germany, and sentenced to a probationary sentence of one year and eight months, and a €100,000 fine, the largest insider-trading case in Germany at the time. Dotcom also pleaded guilty to embezzlement in November 2003 and received a two-year probation sentence.

Megaupload Limited

On 21 March 2005, Dotcom founded Megaupload Limited, a Hong Kong-based file hosting and sharing business that eventually became the 13th most popular site on the internet with over 150 employees, US $175 million revenues, 50 million visitors daily, and estimated to be responsible at its peak for 4% of all internet traffic.

The Megaupload business’ domain names were seized and the sites shut down by the U.S. Justice Department on 19 January 2012, following their indictment and arrests of the owners for allegedly operating as an organization dedicated to copyright infringement.

Civil Litigation

He was sued for copyright infringement as owner of Megaupload. A settlement was later filed.

In December 2011, Dotcom’s Megaworld (owner of Megaupload, Megavideo, Megalive and more) released its “Megaupload Song” promotional music video, which featuredKanye West, will.i.am, Jamie Foxx, Sean “Diddy” Combs, Alicia Keys, Chris Brown and more lauding the service. Universal Music Group (UMG) responded by using theDMCA takedown process to have the clip removed from YouTube and other sites. Dotcom accused UMG of sending “illegitimate takedown notices”, since UMG did not own the song in question, and Megaupload went on to file a lawsuit against UMG. A statement released by UMG claimed that a special arrangement exists between UMG and YouTube which allows UMG to take down any videos featuring their artists, regardless of copyright status. This claim was later explicitly denied by YouTube,which has since reinstated the video.

2012 Arrest in New Zealand: Seizure of Megaupload’s Websites

On January 5, 2012, indictments were filed in the US against Dotcom on criminal copyright infringement charges along with Július Benčko and 5 other associates. On January 20, 2012, Kim Dotcom, Finn Batato, Mathias Ortmann and Bram van der Kolk were arrested in Coatesville, Auckland, New Zealand, by local authorities. Authorities were cooperating with the United States’ FBI and Justice Department, Hong Kong Customs and the Hong Kong Department of Justice, the Netherlands Police Agency and the Public Prosecutor’s Office for Serious Fraud and Environmental Crime in Rotterdam, London’s Metropolitan Police Service, Germany’s Bundeskriminalamt and the German Public Prosecutors, the Royal Canadian Mounted Police and the Canadian Department of Justice in the investigation preceding the arrests.

According to Dotcom’s defence, the police operation against Megaupload was unnecessarily grandiose: “… armed officers arrived in helicopters and dropped into the Dotcom mansion courtyard.”

On January 25th, 2012 (NZ local time) Dotcom was refused bail due to alleged risks of fleeing to Germany.

Other Activities

Dotcom has taken part in the Gumball 3000 international road rally on several occasions, finishing “first” in 2001 in his Mercedes Brabus SV12 Megacar. He also competed in 2004.

Since 2001, Dotcom has received media coverage as a founder of a Hong Kong based investing company called Trendax. The company claimed to use artificial intelligenceto maximize investment return and Dotcom tried to find investors for a hedge fund managed by the company. According to media reports Dotcom never had a proper license to start the fund.

In 2010, Dotcom leased a NZ$30M mansion at Coatesville, near Auckland, owned by Richard and Ruth Bradley, the British founders of Chrisco, and considered the most expensive house in the country. He had an arrangement to buy the mansion when the lease expired, but the New Zealand Government declined his application to buy the land on the basis that he did not meet the “good character” test. Dotcom was granted permanent residency in New Zealand in 2010.

An investigative piece found Dotcom in Hong Kong business records with the new name “Kim Tim Jim Vestor”, allegedly bearing a Finnish passport, and acting as director of several “Mega-” companies, among them Megaupload Ltd. and Megarotic Ltd. According to Megaupload spokesperson B. Lam, Kim is one of many shareholders at Mega and not involved in most day-to-day business decisions.

Kim Dotcom has spoken out against his negative portrayal in the media, claiming to be a reformed character and a legitimate businessman who has been unfairly demonized by US authorities and industry trade groups such as the RIAA and MPAA. He contends that the services offered by his Megaupload site were not significantly different from those of comparable services such as Rapidshare or YouTube, and he has just been used as a scapegoat because of his hacker past. Dotcom is also keen to point out his charitable works, including funding the fireworks display for New Year 2011 in Auckland , and donating large amounts of money to the relief fund following the devastating2011 Christchurch earthquakes, and explains that his property purchases in New Zealand were approved by several other government Ministers before being vetoed at the last minute by Justice Minister Simon Power, after the US Department of Justice secretly asked his department for help with their investigation of Dotcom.

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  47. ^ Fisher, David (June 12, 2011). Flamboyant former hacker to settle in NZ.The New Zealand Herald. Retrieved January 21, 2012.
  48. ^ From Rogue To Vogue: Megaupload and Kim Dotcom. December 18, 2011, TorrentFreak.com
  49. ^ Kim Dotcommando: Life’s no game. By David Fisher, New Zealand Herald, Sunday Jan 29, 2012.
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11 Comments on “Chronic: Megalife of Kim Dotcom”

  1. 1 technoid » Blog Archive » Megaupload Takedown Had NO Impact ON Piracy said at 1:44 am on February 15th, 2012:

    [...] their much publicised takedown of Megaupload. The US government, in its indictment against the Megaupload said that the company had raised US$175 million – partly from piracy – since its [...]

  2. 2 mcsixtyfive » Blog Archive » Megaupload Takedown Had NO Impact ON Piracy said at 1:14 am on February 17th, 2012:

    [...] their much publicised takedown of Megaupload. The US government, in its indictment against the Megaupload said that the company had raised US$175 million – partly from piracy – since its [...]

  3. 3 strtlat said at 1:56 am on February 24th, 2012:

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