Feds slam Megaupload with indictment and racketeering charges, Anonymous retaliates
The United States Department of Justice has issued a statement confirming that it has arrested seven individuals connected to popular file-sharing site Megaupload and its various subsidiaries. The alleged criminals and two corporations named in the complaint are charged with generating more than $175 million in profits through racketeering, conspiracy to commit copyright infringement, conspiring to commit money laundering, and two substantial counts of copyright infringement. The individuals, including Megaupload founder Kim Schmitz, face up to 20 years in prison if convicted.
One might expect a file locker site to shield itself behind the DMCA’s “safe harbor” provision that protects websites from copyright infringement committed by their users so long as they comply with the copyright takedown notifications. According to the indictment, Megaupload was structured in a way that promoted the distribution of copyrighted material. (We have a PDF here, as the DoJ’s site is currently down.)
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.
The DOJ also alleges that the conspirators failed to terminate the accounts of known copyright infringers, “selectively complied” with orders to remove copyrighted content, and misrepresented whether content had actually been deleted by disabling particular identified links to a file rather than erasing the file itself. These allegations go far beyond the normal scope of copyright infringement lawsuits — such cases are nearly always civil rather than criminal.
Not all publicity is good publicity
Megaupload was in the news last month after UMG abused the DMCA to force YouTube to withdraw a music video praising the service that featured a number of prominent musicians. Megaupload came out the winner as far as the court of public opinion was concerned, but the federal indictment makes note of the websites 150 million registered users, 50 million daily visitors, and 4% share of Internet traffic — all of which were disclosed in the music video.
Furthermore, the site’s founder, Kim Schmitz (aka Kimble, Kim Dotcom, and Kim Tim Jim Vestor) isn’t likely to cut a sympathetic figure at trial. Schmitz was convicted of computer fraud and handling stolen goods in 1998 and of embezzlement and insider trading in 2003 (his pump-and-dump stock scam left two other companies bankrupt). In 2010, he bought a $30 million house in New Zealand, said to be one of the most expensive in the country.
This is not a man who understands the value of being small, and his personal history adds credence to the idea that the Feds aren’t blowing smoke on this own or acting on behalf of the entertainment industry. Not that such minutiae stopped Anonymous.
Mega [email protected]#$-up
Less than two hours after the Feds announced they’d arrested Schmitz and taken MegaUpload offline, Anonymous retaliated by attacking riaa.org, universalmusic.com and justice.gov. All four sites are currently offline.
Anonymous “operative” Barret Brown told RT.com that ““It was in retaliation for Megaupload,” that “more is coming” and that this was part of an effort to “damage campaign raising abilities of remaining Democrats who support SOPA.”
Slow down, folks.
We’ve written quite a bit about SOPA here at ExtremeTech and I’ve made my own opinion clear: It’s a terribly written law. It’s also got nothing to do with the DoJ’s execution of this indictment. The decision in question was handed down on January 5. That means the case went before a grand jury for discussion and deliberation at some prior date.
Grand jury indictments don’t get handed out on the basis of a 30 minute PowerPoint presentation and the US doesn’t coordinate extensively with New Zealand law enforcement to make arrests at the drop of a hat. This isn’t a knee-jerk retaliation for the SOPA protests. It’s possible that some of the Congressional debates were scheduled to coincide with the government’s arrests, but these are scarcely trumped up charges.
There’s a difference between putting unjust power in the hands of private actors and achieving millionaire status on the backs of artists and filmmakers who aren’t being paid for their work. There’s a difference between hauling individual citizens into court and charging them outrageous infringement fees and asking the law to properly protect your company from mass theft. All too often, the RIAA and MPAA have been on the wrong side of that line — but that doesn’t mean they’re on the wrong side of it today.