US authorities shut down Megaupload.com over copyright infringement

The founders of the company – Kim Dotcom, who is also known as Kim Schmitz and
Kim Tim Jim Vestor, and Mathias Ortmann – were charged. The company’s chief
marketing and sales officer, Finn Batato, head of development Sven
Echternach and other company officials were also charged.

Dotcom, Batato, Ortmann and another individual charged were arrested in
Auckland, New Zealand, by local authorities on Thursday and will face
extradition hearings, the US Justice Department said. Echternach and two
others charged remain at large.

The allegations included copyright infringement as well as conspiracy to
commit copyright infringement, conspiracy to commit money laundering and
conspiracy to commit racketeering.

If convicted, the maximum penalties are 20 years for conspiracy to commit
racketeering and to commit money laundering and five years for each count of
copyright infringement and five years for conspiracy to commit copyright
infringement.

The companies charged, Megaupload Ltd and Vestor Ltd, were both registered in
Hong Kong and owned either in large part or solely by Dotcom. A lawyer who
has previously worked with Megaupload was not immediately available for
comment.

The charges emerge as the US Congress is struggling over legislation sought by
the movie and music industries to crack down on internet piracy and theft of
content. Major internet sites like Google and Facebook complained that such
legislation as it was drafted would lead to censorship.

A Justice Department official said the timing of the arrests and unsealing of
the case were not related to the battle in Congress. Hours after announcing
the indictment and arrests, the Justice Department’s website was
inaccessible.

Megaupload has boasted of having more than 150 million registered users and 50
million daily visitors, according to the indictment. At one point, it was
estimated to be the 13th most frequently visited website on the internet.

Users could upload material to the company’s sites which then would create a
link that could be distributed. The sites, which included video, music and
pornography, did not provide search capabilities but rather relied on others
to publish the links, the indictment said.

Users could purchase memberships to the site to obtain faster upload and
download services, the primary source of revenue. Material that was not
regularly downloaded was deleted and financial incentives were offered for
popular content, according to the charges.

The web page with the link to the copyrighted material would include
advertisements, another source of revenue.

If copyright holders complained about a specific link to the website,
prosecutors said that Megaupload.com would remove that link but scores of
others existed to the same material, according to prosecutors.

Other material found uploaded included child pornography and terrorism
propaganda videos, according to the indictment. The US government’s
investigation began in March 2010.

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