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In the Wake of Blackout Protests, FBI Shuts Down Megaupload for Massive Online Copyright Infringement

January 19, 2012

One day after Internet websites like Wikipedia and Google protested the SOPA and PIPA anti-piracy bills with a “Blackout Day,” the Federal Bureau of Investigation Jan. 19 shut down and related sites based on a Jan. 5 federal grand jury indictment in one of “the largest criminal copyright cases ever brought by the United States,” the U.S. Department of Justice announced.

Seven individuals and two companies— Megaupload Limited and Vestor Limited—were targeted in an indictment that brings charges for engaging in a racketeering conspiracy, conspiracy to commit copyright infringement, conspiracy to commit money laundering, and two substantive counts of criminal copyright infringement. According to the DOJ press release, the individuals each face a maximum penalty of 20 years in prison on the charge of conspiracy to commit racketeering, five years in prison on the charge of conspiracy to commit copyright infringement, 20 years in prison on the charge of conspiracy to commit money laundering, and five years in prison on each of the substantive charges of criminal copyright infringement.

The individuals charged in the indictment are:

  • Kim Dotcom, aka Kim Schmitz, who is founder of Megaupload Limited, the director and sole shareholder of Vestor Limited, and a citizen of both Hong Kong and New Zealand
  • Finn Batato, 38, a citizen and resident of Germany;
  • Julius Bencko, 35, a citizen and resident of Slovakia;
  • Sven Echternach, 39, a citizen and resident of Germany;
  • Mathias Ortmann, 40, a citizen of Germany and resident of both Germany and Hong Kong;
  • Andrus Nomm, 32, a citizen of Estonia and resident of both Turkey and Estonia; and
  • Bram van der Kolk, aka Bramos, 29, a Dutch citizen and resident of both the Netherlands and New Zealand.

“This action is 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,” the DOJ press released stated, noting that the alleged scheme has generated more than $175 million in criminal proceeds and caused more than half a billion dollars in harm to copyright owners. It noted that more than 20 search warrants have been executed in the United States and eight other countries, and that more than $50 million in assets have been seized, along with 18 domain names associated with the alleged conspiracy.

This case is being prosecuted in the U.S. District Court for the Eastern District of Virginia and investigated by the FBI at the National Intellectual Property Rights Coordination Center, with assistance from U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and authorities in the United Kingdom, Canada, Germany, Hong Kong, Australia, New Zealand, and the Philippines.

The press release continues as follows:

According to the indictment, for more than five years the conspiracy has operated websites that unlawfully reproduce and distribute infringing copies of copyrighted works, including movies – often before their theatrical release – music, television programs, electronic books, and business and entertainment software on a massive scale. The conspirators’ content hosting site,, is advertised as having more than one billion visits to the site, more than 150 million registered users, 50 million daily visitors and accounting for four percent of the total traffic on the Internet. The estimated harm caused by the conspiracy’s criminal conduct to copyright holders is well in excess of $500 million. The conspirators allegedly earned more than $175 million in illegal profits through advertising revenue and selling premium memberships.

The indictment states that the conspirators conducted their illegal operation using a business model expressly designed to promote uploading of the most popular copyrighted works for many millions of users to download. The indictment alleges that the site was structured to discourage the vast majority of its users from using Megaupload for long-term or personal storage by automatically deleting content that was not regularly downloaded. The conspirators further allegedly offered a rewards program that would provide users with financial incentives to upload popular content and drive web traffic to the site, often through user-generated websites known as linking sites. The conspirators allegedly paid users whom they specifically knew uploaded infringing content and publicized their links to users throughout the world.

In addition, by actively supporting the use of third-party linking sites to publicize infringing content, the conspirators did not need to publicize such content on the Megaupload site. Instead, the indictment alleges that the conspirators manipulated the perception of content available on their servers by not providing a public search function on the Megaupload site and by not including popular infringing content on the publicly available lists of top content downloaded by its users.

As alleged in the indictment, the conspirators failed to terminate accounts of users with known copyright infringement, selectively complied with their obligations to remove copyrighted materials from their servers and deliberately misrepresented to copyright holders that they had removed infringing content. 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 indictment charges the defendants with conspiring to launder money by paying users through the sites’ uploader reward program and paying companies to host the infringing content.


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