The US government has shut down top file hosting service Megaupload and had its founder arrested on suspicion of causing $500 million in lost revenue to content sellers.
The Megaupload sites were managed through an international network of companies, head-quartered in Hong Kong.
Although not a US company and not managed from the US, the fact that it maintained US servers and supplied millions of US visitors with illegal downloads was considered ample legal grounds for the federal government to move against it.
The indictments centre on German millionaire hacker Kim Schmitz, or “Kimble,” who has led a colourful and exceptionally crooked career centred on computer crime and fraud, having been convicted at various times and in various countries of credit card fraud, insider trading and embezzlement, making him a less than savoury poster child for Internet liberties.
The US government claims that in 2010 alone he made some $42 million from piracy-related activities.
He was reportedly arrested at his “$30 million” mansion in New Zealand, pending extradition to the US to face trial.
5 other less interesting Megaupload executives have been indicted, of whom 3 have already been arrested. All of those indicted were citizens of various European countries and resided either in Europe, Hong Kong or New Zealand.
Strangely, Megaupload’s American CEO and noted rapper Swizz Beatz is apparently not named in the indictments.
Megaupload was still protesting its total innocence and holding out for a “dialogue” with copyright holders up until the moment its site was taken offline:
“The fact is that the vast majority of Mega’s Internet traffic is legitimate, and we are here to stay. If the content industry would like to take advantage of our popularity, we are happy to enter into a dialogue. We have some good ideas. Please get in touch.”
Megaupload had in recent years begun trying to legitimise itself by soliciting various mysterious endorsements from famous US celebrities, efforts which evidently proved futile.
Whilst no objective statistics exist as to just how much of the content hosted on Megaupload’s servers was legitimate (Megaupload asserts the “vast majority” was legitimate whilst its attackers maintain the exact opposite), any honest evaluation would probably have to conclude that the main reason for its popularity was that torrents are a hassle, and that the vast majority of the material it hosted was less than legitimate.
The arrests come only a day after high profile protests by various other top websites over newly proposed US laws designed to grant copyright holders greater powers to police the Internet.
Both of the proposed laws now appear to be in some difficulty, but there is much speculation that the timing of the arrests is intended to be symbolic.
However, as the Megaupload arrests all took place using current laws, they have not only further inflamed Internet opinion against SOPA, PIPA and the major copyright lobbies behind them, but have also apparently demonstrated that US copyright holders are quite able to launch crippling legal attacks on internationally managed sites using only existing laws.
Megaupload’s eventual fate remains unclear – the fate of piracy-related sites in similar positions has varied greatly, from those that apparently sustained all legal assaults unscathed (such as The Pirate Bay) and others which successfully sold out to copyright holders, to those whose business models simply collapsed under a hail of litigation and criminal charges.