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    Internet Pirate Marooned in his New Zealand Mansion

    Wednesday, February 22, 2012

    Kim Dotcom (nee Kim Schmitz), internet pirate and founder of megaupload.com, has been granted bail in New Zealand today as District Court Judge Nevin Dawson deemed that Dotcom was no longer a flight risk. US Federal prosecutors shut down the Megaupload domain name and froze its assets on 19 January this year and laid charges against two corporations (Megaupload Limited and Vestor Limited) and seven individuals (three of whom remain at large). Dotcom, along with Finn Batato (Megaupload CMO), Mathias Ortmann (Megaupload CTO and co-founder) and Bram van der Kolk, were all arrested on 20 January 2012 at Dotcom’s New Zealand home at the request of a US Federal Prosecutor, in the making of what has been described by the US Department of Justice as “among the largest criminal copyright cases ever bought by the United States”. Almost $20 million worth of assets were seized during the arrest and despite Dotcom’s emphatic denial of any wrongdoing, NZ police state that when they arrived at Dotcom’s home to arrest him, Dotcom activated electronic locks and sought refuge in a safety room where he “sat cross-legged near a safe that contained a loaded shotgun”.


    Megaupload was reportedly, at one point, the 13th most visited site on the internet, generated 4% of internet traffic, and allegedly earned over $US175 million in profits. The US Department of Justice claim that this income is the direct proceeds of crime involving the illegal file sharing of pirated film, TV shows, music, books and software, and that Megaupload has caused “more than half a billion dollars worth in harm to copyright owners”. Dotcom has been charged with three criminal copyright counts and five wire fraud counts in addition to one count of racketeering, one count of conspiring money laundering and two counts of criminal copyright infringement charges. In the USA, racketeering and money laundering charges can result in jail sentences. Some have viewed this case as an attempt by the US Department of Justice to make an example of Dotcom to prevent criminal copyright infringements on the internet.


    Consequently, most of Megaupload’s assets have been frozen by authorities in the USA, NZ, and Hong Kong.  Given Dotcom’s apparent inability to access any significant funds, Justice Dawson concluded that community perceptions about the wealth (and consequently the flight risk) of Dotcom are exaggerated. This indicates a significant shift in judicial reasoning, as Dotcom’s second bail application at the beginning on the month was unsuccessful, based on the existence of his numerous bank accounts, aliases, credit cards and passports, which landed him in a NZ jail for three weeks. However, it was found that many of Dotcom’s overseas bank accounts were empty, and his passports have since been seized, leaving Dawson J to believe that Dotcom will opt to stay in New Zealand with his family pending the extradition trial. The bail terms are such that Dotcom must stay in his Coatsville residence, and he has been denied access to the internet and, incidentally, helicopters.


    This case was initiated by the FBI at the National Intellectual Property Rights Coordination Center and is part of an undertaking by the Department of Justice Task Force on Intellectual Property in the USA to stop the theft of intellectual property. 


    (The assistance of Alexandra Nash in authoring this blog article is acknowledged).


    Disclaimer: This blog is for general informational purposes only. It is not legal advice nor is it a substitute for legal advice. Readers should seek legal advice on their own particular circumstances. Alan Arnott is a technology & telecommunications lawyer with qualifications in computer science and law with Arnotts Lawyers Jones Bay Wharf in Sydney. For more information, please visit www.arnotts.net.au.

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