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File-Sharing Site MegaUpload.com Indicted for Internet Piracy; Shut Down by U.S. Officials

The federal action--and subsequent arrests of MegaUpload.com officials--appears to have sparked denial of service attacks on some websites

MegaUpload.com, one of the Internet's most well-known file-sharing sites, was shuttered by federal officials Thursday, and its founder Kim Dotcom (formerly Kim Schmitz) and three other executives connected to the parent company MegaUpload Limited, were arrested in New Zealand.

Hacker collective Anonymous appeared to respond to the government's action by taking down several high-profile sites with a quickly coordinated DDoS attack.

As of Thursday afternoon, Anonymous seemed to have shut down the websites for the RIAA, the MPAA, Universal Music Group, and even the U.S. Copyright Office. The timing of the indictment almost certainly fanned the flames of Anonymous's anger, coming just one day after the group participated in a nationwide protest against the Stop Online Piracy Act (SOPA) which the group had vigorously opposed for months.

[Read: Were SOPA/PIPA Protests a Success?]

An 72-page indictment filed in U.S. District Court based in Alexandria, Virgina, near Washington D.C. charges MegaUpload.com with conspiracy to commit racketeering, copyright infringement, and money laundering, among other charges connected with illegal use of copyrighted materials. The indictment was signed by U.S. Attorney Neil H. MacBride of the Eastern District of Virginia. Some of MegaUpload.com's servers reportedly are in Auburn, Virginia, which is in the Eastern District.

A statement from the FBI called the action "among the largest criminal copyright cases ever brought by the United States and directly targets the misuse of a public content storage and distribution site to commit and facilitate intellectual property crime."

More Details

The indictment alleges that the criminal enterprise is led by Dotcom and Kim Tim Jim Vestor, 37, a resident of both Hong Kong and New Zealand. Federal statements said that Dotcom founded Megaupload Limited and is the director and sole shareholder of Vestor Limited, which has been used to hold his ownership interests in the Mega-affiliated sites.

The FBI statement said the following people also were charged in the indictment:

  • 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;
  • 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;
  • 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;
  • 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 Thursday in New Zealand.

The indictment called Megaupload.com "a commercial website and service...that reproduces and distributes copies of popular copyrighted content over the Internet without authorization." The indictment also said employees and organizations affiliated with MegaUpload were part of a "Mega Conspiracy."

The indictment estimated that the infringements cost copyright holders up to $500 million in damages, while the company and its leaders reported incomes of more than $175 million. It also stated: "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 350 million daily visits, and to account for approximately four percent of the total traffic on the Internet."

Background

According to the indictment, MegaUpload.com, established around 2005, was, at one point, the 13th most visited site on the Internet, and accounted for vast amounts of Internet traffic as users uploaded and downloaded music, movies, books, video games, and computer software. The site was unique among file-sharing sites in that it had the support of several high-profile celebrities (Kanye West and Wil.i.am, among others appeared in a MegaUpload video posted on YouTube). The site has also been viewed primarily a way of sending files that are too large to be sent by email via the web site's hosting services.

The indictment stated that the incomes made by the company's executives came primarily from advertising revenues and "premium subscriptions" purchased by heavy users of the Megaupload service. "In exchange for payment, the Mega Conspiracy provides the fast reproduction and distribution of infringing copies of copyrighted works from its computer servers located around the world," prosecutors claimed.

The indictment of MegaUpload Limited cites several movies available for free on MegaUload.com. They range from "Lord of the Rings: the Fellowship of the Ring" to "Twilight Saga: Breaking Dawn- Part 1" and the location of the servers from which the movie was made publically available. MegaUpload.com's indictment comes at a time when Congress is debating stricter copyright infringement laws--the Stop Online Piracy Act (SOPA) in the Senate and the Protect IP Act (PIPA) in the House.

[Read: SOPA and PIPA: Just the Facts]

The Associated Press reported that before the site was taken down, Megaupload.com posted a statement saying allegations of piracy were "grotesquely overblown."


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