Feds Seize $50 Million in Megaupload Assets, Lodge New Charges

Kim Dotcom poses beside a car in Hong Kong. Photo: Handout

The authorities said Friday they have seized $50 million in Megaupload-related assets and added additional charges in one of the United States’ largest criminal copyright infringement prosecutions.

Megaupload, the popular file-sharing site, was shuttered last month and its top officials indicted by the Justice Department, just days after online protests scuttled a Congressional proposal to make changes to the internet to reduce online copyright infringement.

Seven individuals connected to the Hong Kong-based site were indicted on a variety of charges, including criminal copyright infringement and conspiracy to commit money laundering. Five of the members of what the authorities called a 5-year-old “racketeering conspiracy” have been arrested in New Zealand, where they are being held pending extradition to the United States.

One of those arrested was Kim Schmitz, aka Kim Dotcom, Megaupload’s high-flying founder, who has been denied bail in New Zealand. Items seized from Dotcom include a large collection of cars, a mansion, bank accounts, jet skis and jewelry.

The government said the site, which generated millions in user fees and advertising, facilitated copyright infringement of movies “often before their theatrical release, music, television programs, electronic books, and business and entertainment software on a massive scale.” The government said Megaupload’s “estimated harm” to copyright holders was “well in excess of $500 million.”

Megaupload was on the recording and movie industries’ most-hated lists, often being accused of facilitating wanton infringement of their members’ copyrights. The indictment claims Megaupload induced users to upload copyrighted works for others to download, and that it often failed to comply with removal notices from rights holders under the Digital Millennium Copyright Act.

New charges (.pdf) levied Friday allege that Megaupload falsely represented to rights holders that it had removed infringing works from its servers.

The superseding indictment in the Eastern District of Virginia also claims that Megaupload paid one of its registered users $3,400 between 2008 and 2009 for uploading 16,960 files that generated 34 million views. The files included motion pictures Ocean’s Thirteen, Ratatouille and Evan Almighty, the government said.

The government, meanwhile, also said Friday that, despite claims of having 180 million registered users, the site had 66.6 million. The authorities said that 5.86 million of these registered users uploaded files, “demonstrating that more than 90 percent of their registered users only used the defendant’s system to download.”

Still, anyone who used Megaupload as a way to share and store legitimate files is now likely never going to be able to get them back.