One day after an extensive Internet blackout in protest of two pending anti-piracy bills, the Justice Department on Thursday announced that it had charged the owners of Megaupload with online copyright infringement.
Seven people and two corporations—Megaupload Limited and Vestor Limited—were indicted by a New York grand jury on Jan. 5 and charged with engaging in a racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering, and two substantive counts of criminal copyright infringement. If convicted, those involved face up to 50 years in prison on all charges.
The accused generated more than $175 million and caused more than $1 billion in harm via megaupload.com and other sites, the DOJ said.
The effort was spearheaded by Megaupload Limited founder Kim Dotcom (aka Kim Schmitz or Kim Tim Jim Vestor), a 37-year-old resident of Hong Kong and New Zealand. Dotcom was arrested today in Auckland, along with Megaupload chief marketing officer Finn Batato, co-founder and CTO Mathias Ortmann, and programmer Bram van der Kolk.
Also named in the indictment were graphic designer Julius Bencko, head of business development Sven Echternach, and programmer Andrus Nomm.
More than 20 search warrants were executed in the U.S. and eight other countries today. About $50 million worth of assets and targeted sites where Megaupload has servers as well as 18 domain names were also seized. Megaupload.com is currently offline.
The group is accused of running Web sites that illegally profited from the distribution and reproduction of copyrighted works for more than five years. That content included movies that hit Megaupload before their theatrical releases, as well as music, TV shows, e-books, and entertainment and business software.
Megaupload used a rewards program that provided financial incentives for uploading popular content that drove traffic to the site, the indictment said. "The conspirators allegedly paid users whom they specifically knew uploaded infringing content and publicized their links to users throughout the world" according to the DOJ.
Megaupload did not include a search function; the owners used third-party linking sites to publicize content. In violation of the law, Megaupload failed to delete the accounts of those that contained infringing material.
"For example, when notified by a rights holder that a file contained infringing content, the indictment alleges that the conspirators would disable only a single link to the file, deliberately and deceptively leaving the infringing content in place to make it seamlessly available to millions of users to access through any one of the many duplicate links available for that file," the DOJ said.
Celebrity Link?
Not named in the indictment is Kasseem Dean, CEO of Megaupload, who is better known as hip hop producer Swizz Beatz and husband of Alicia Keys. As reported by the New York Post, Beatz asked high-profile friends like Sean "Diddy" Combs, Kanye West, and Will.i.am to participate in a video promoting Megaupload (below), which is not sitting too well with the artists' label, Universal Music Group. Last month, Universal had YouTube pull "Mega Song," prompting a lawsuit from Megaupload, according to TorrentFreak.
The song has since been reinstated and on the YouTube page for the "Mega Song," Dotcom said the Universal lawsuit highlights why bills like the Stop Online Piracy Act (SOPA) and the PROTECT IP Act (PIPA) need to be stopped.
Both bills would allow the DOJ to go after overseas, "rogue" Web sites that traffic in counterfeit goods, from DVDs and MP3s to fake purses and prescription drugs. Detractors, however, argue that the bill is too broad and far-reaching and could hurt legitimate sites.
Both sides could likely make a case using today's Megaupload indictment. On the one hand, supporters could say that cases like this are exactly the reason why we need laws like SOPA and PIPA, but opponents could counter with the fact that the DOJ appears to be working fine without them.