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FBI closes Megaupload, extradites owners from NZ

Fri 20 Jan 2012 8:54am GMT / 3:54am EST / 12:54am PST
LegalSecurity

Anonymous retaliates with attacks against MPAA, Justice Dept.

The US government has closed file sharing site Megaupload, charging owners and employees with huge copyright infringement and extraditing them from their New Zealand base.

Seventy police raided ten properties, arresting the site's founder and several executives, seizing extensive physical and property assets and $8 million from banking institutions. The group stands accused of making more than $175 million from illegal activities and denying copyright owners more than $500 million in revenues.

A statement issued by the FBI regarding the operation details the charges and potential ramifications for the accused.

"The individuals and two corporations - Megaupload Limited and Vestor Limited - were indicted by a grand jury in the Eastern District of Virginia on Jan. 5, 2012, 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.

"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."

Megaupload had operated by allowing users to upload files, largely music and video, which could then be downloaded by others from a uniquely generated URL. By paying a fee, users could become premium members and increase their download speeds - Megaupload's main source of income.

The site also had considerable revenues from its advertising inventory.

"The FBI contacted New Zealand Police in early 2011 with a request to assist with their investigation into the Mega Conspiracy," said DI Grant Wormald of New Zealand's Organised & Financial Crime Agency.

"All the accused have been indicted in the United States. We will continue to work with the U.S. authorities to assist with the extradition proceedings,"

"We have nothing to hide," said site founder and owner Kim Dotcom, A.K.A. Kim Schmidt. A statement issued before the site was taken offline also asserted that the vast majority of the site's business was entirely legitimate.

Shortly after the closure and arrests, someone purporting to be from notorious hacktivist collective Anonymous posted a tweet reading: "The government takes down Megaupload? 15 minutes later Anonymous takes down government & record label sites."

The US Department of Justice's public site came under a massive denial of service attack at around the same time, as did the sites of Universal Music and the MPAA, both vocal public supporters of the SOPA bill and anti-piracy actions on the whole.

The Recording Industry Association of America (RIAA) and the U.S. Copyright Office were also attacked. Sources from Anonymous said it had been the group's largest action yet.

Whilst neither the police operation nor the retaliations are directly linked to the recent discussions and protests surrounding SOPA and PIPA, it seems highly unlikely that the timing of the actions was entirely coincidental.

27 Comments

Craig Burkey
Software Engineer

197 363 1.8
Its stuff like this that shows why SOPA/PIPA needs to be stopped, what about all the other people that have legitimate files stored? What next Google Docs? It undermines the whole cloud computing philosophy.
"Create and share your work online and access your documents from anywhere" except if other users are abusing the system then we'll vape it without warning

Posted:2 years ago

#1

Andrew Goodchild
Studying development

1,253 418 0.3
It surprises me that they went after Megaupload, obviously illegal sharing must happen there, else there would be no case here, but any reference I see of it is generally people using it to share their own work, as apposed to pirate bay, shareaza or soulseek. I guess becuase the files are stored in a centralised location it makes action easier, but it seems they have gonna after a target where the impact on illegal sharing will be negligable, whilst the impact on legitamate sharing will be much bigger.

Is there any information on whether Megaupload were prepared to remove infringing materials? I would hope that that resolution would have been approached first? What happens when people put copyrighted material in a public Dropbox or Skydrive folder? It's clearly against ToS, but I'm sure it was with Megaupload too? Were they being more lax when things were pointed out, or is it that FBI prefer to go after foriegn companies rather than Microsoft?

Posted:2 years ago

#2
Well - this has unfortunately caused a flash hacker uprising lashing out in retaliation against TPTB

Posted:2 years ago

#3

Peter Dwyer
Games Designer/Developer

482 293 0.6
The difference between most sharing sites and Mega Upload was that they were charging people for downloading of copyrighted material and thus profiting from the sharing of illegal files.

Normally you can upload a DVD in order to copy it to a new location provided that

A) you own the original
B) it's for your personal use i.e a legitimate backup

In fact a few blu-ray movies now also include the ability to copy or download them to mobile devices so you can watch on the go.

Posted:2 years ago

#4

Klaus Preisinger
Freelance Writing

1,128 1,161 1.0
They will get them bad on the money laundering. If that is true, it will stick and bring them down.

Enabling people to commit piracy will not stick though. You do not see Sony sue Sony over DVD burners and they enable people as much to commit piracy as any Filehoster ever did.

The argument of people earning money will illegal use will probably be disarmed by Megaupload being a system to allow anybody to make money with totally legal downloads. If you made or own music and chose to earn money by getting a few cents off each Megadownload upload, then you would be an oddball, but still a legal oddball. The core question the is whether Megaupload has to monitor every transaction and determining the validity of every file sold that way. Common practice in a mall, highly unusual in the Internet.

As any Cloud service is vulnerable to being abused as a place for users to share and copy any sort of data, this willingness of slaughtering a service as a whole because part of it infringed the law is a definite death sentence for every company. Megaupload might have had a high rate of questionable downloads, but where do you draw the line to shut a service such as this down? 5% abuse? 10% abuse? 50% abuse?

Heck, with freemail services offering more and more data storage, people could probably create an illegal download network just with mailing data back and forth on gmail accounts. Just put your email address on a list and the new movie will be mailed to you.


Posted:2 years ago

#5

Graeme Quantrill
Mobile App Developer

42 8 0.2
Peter, no what they were charging for was you to download content. Now, this includes both legal and illegal content and at no point do MU advertise any content. They merely provide a cloud service for storage regardless of content.

If we're saying that all locker systems need policing or they'll be shut down then basically the internet is a little screwed as the like of google, all email systems, etc would need to be policed for copyright abuse

Posted:2 years ago

#6

Ken Addeh

37 0 0.0
US loves to extradite people, don't they?

Posted:2 years ago

#7

John Donnelly
Quality Assurance

313 38 0.1
Nope Ken.

They are the party requesting the extradation not the ones doing it.
Its just right now there are some high profile cases in the UK with people fighting extradation to the US mainly those involved in computer/IT crimes.

Posted:2 years ago

#8

Paolo Giunti
Localisation Project Manager

42 8 0.2
Either there's something I'm missing or this is just terribly wrong.
It would be like shutting down Hertz or Avis because some folks who rented their cars used them for street-racing.

Posted:2 years ago

#9

Ken Addeh

37 0 0.0
@John:
My mistake. That's what I meant.

Posted:2 years ago

#10

Christopher Bowen
Editor in Chief

447 692 1.5
Guys, don't fool yourselves. Megaupload is *SPECIFICALLY* cashing in on copyright infringement. Not in the way that Google is accused of doing by Viacom, they specifically and knowingly promote illegal material (Ars Technica has the emails). Furthermore, they steal from their customers as well, as cancellation notices often go into a memory hole, and there is literally no support. In short, once they have you, they have you, and not only that, but it extends beyond just Megaupload, as they have businesses revolving around video hosting, pornography, and image hosting. All of these actively infringe copyright.

I'm against SOPA, and against pretty much all forms of new law to prevent infringement, mainly because (as seen here) existing law works. However, I shed no tears for Megaupload, because they were the worst.

Posted:2 years ago

#11

Drew Dewsall
Editor

11 0 0.0
Crap does that mean no more free Family Guy when I am on the move.... Bollocks!

Posted:2 years ago

#12

Peter Dwyer
Games Designer/Developer

482 293 0.6
Graeme, If they charged for people to download. Then how are they providing a cloud service? You've described a download service that charges for access to it's content whilst claiming not to know what that content is.

Posted:2 years ago

#13

Jma
Programmer

23 16 0.7
@Christopher +1 Couldn't agree more with you

Posted:2 years ago

#14

Wes Peters
Software Engineer

6 0 0.0
SOPA and PIPA attempt to increase the speed with which infringers can be taken down, but the legal system works slowly because it absolutely has to get it right. The FBI aren't famous for acting quickly (maybe with the exception of kidnappings), but they are famous for being dogged. And yes, the USA does like to extradite people. When you consider the alternatives -- middle of the night kidnappings or other forms of "extreme rendition", be glad that we have international law and the laws of nations, including extradition, working for you. For the extradition to happen, the FBI et al have to be able to convince the courts in New Zealand they have compelling evidence that is likely to lead to a conviction.

Posted:2 years ago

#15
The timing could not have been better to the Anti-SOPA though, in my opinion. Wonder if someone in the police department intented it that way? One day after protested blackout, a real blackout occurred to an international website on another country. Looks to me like if they really want to, they could already do it without those laws.

Posted:2 years ago

#16

gi biz
;,pgc.eu

341 51 0.1
So, now that the americans saved us from megaporn, I would really love to see some figures about the boost that movies, music, games and what else will undoubtedly benefit from, in terms of sales.
As far as those informations remain secret and no evident damage to us is proven, those acts will remain simple vulgar bullying. Hopefully someone will be able to show us that by ruining the life of those people, they improved the life of at least as many persons.

We've been discussing about whether piracy is a problem as big as many of us believe, now they got a big fish, no Christmas or other high sales period is approaching, it's a very good occasion to measure things.

Posted:2 years ago

#17

J S
Artist

7 2 0.3
I can't imagine that its just a coincidence that they are are moving to take out Megaupload at exactly the same moment that SOPA has come to public awareness.

A show of force is handy to remind the public who is in control.

Edited 1 times. Last edit by J S on 20th January 2012 7:28pm

Posted:2 years ago

#18

Luke Child

13 1 0.1
@Christopher Didn't know that, I've read around 5 articles on this today and you are the first to mention that; surprising what some (Unintentionally?) held back information can cause you to come to a conclusion too. Sad day for those which had data on the Megaupload servers though, still now that the alternate MU site is available then they should be able to retrieve it before it eventually gets axed completely.

Still shutting this site down will do nothing, all that will happen is traffic will instead re-direct itself to new sites or instead use other filesharers such as rapidshare, fileserve and hotfile etc... And so the cog begins anew.

Posted:2 years ago

#19

gi biz
;,pgc.eu

341 51 0.1
@Christopher: neither I did know that. Since they were charging customers I assumed they were paying the rights at least for the videos.

@Luke: which reminds me: how long will it take before people realize they can use git to share illegal files? I have local backups of my project but still... the same goes for my online storage service :/
Anyways, megaupload was the most popular and most links are dead for now, so if reducing piracy has a visible effect on games/movies sales we will see those effects, at least temporarily.

Posted:2 years ago

#20
Mega-upload seems to have been painted as the villain when frankly it's not there were plenty of legal sites content and services which ran through megavideo it had a youtube like service with all kinds of funny thing's in it.

And you could upload your own video's and allow folks to watch them via their own plugin without any size limits, useful for indie dev's wanting to release media, any illegal content on it was entirely the doing of the probably small no of user's involved, not the site's and given I had a year's subscription to megavideo (megaupload's youtubesque site) pretty annoying personally, whilst I rarely support hacker action's, given the music industry just cost me perfectly good money, I'll shed no tear's if someone makes them loose a bit in return, frankly whilst it wouldn't be worth it do it alone, if legal customer's of megavideo banded together to make a class action suit against them I'd sign up, it's one thing going after illegal services and another just site's that allow user's to upload files, weather they charge for it or not, it's not like trying to upload anything that lasts any length of time on youtube is free either, and megavideo did allow 45 minutes every 4 hours of free watching in addition, so well basically in many ways it was an alternative youtube, and just got shut down, there was no reason to shut down megavideo along with megaupload but they have so WHY? comes to mind, trying to lay the blame on the owner of the site when it's clearly just a small proportion of user's is ridiculous, it's in the same vein as locking up Sir Tim Berners-Lee because people used the web to pirate stuff.

Posted:2 years ago

#21

Klaus Preisinger
Freelance Writing

1,128 1,161 1.0
If I have content, which really belongs to me and I put it up on Megaupload, then the deal of getting paid per download is pretty sweet. Similar to what Google is attempting, or Apple is trying with their adware system you bolt onto your product. Sure, Megaupload has to somehow figure out how to frustrate people enough to buy an account, much like a free2play MMO frustrates people into buying stuff accelerating the game to normal speed.

That is ultimately Megaupload's best line of defense against the piracy allegations. They pay per download without ever knowing what is being downloaded, because it does not matter for them.

The piracy on Megaupload is just a user exploit if you will. Why create your own smash hit content, when you can copy&paste?

It will be hard of convicting Megaupload on the charges of indirectly aiding pirates. Nobody sues weapon manufacturers, or gun shop owners. Nobody sues the local government, if meth is being sold at a public park. There is law enforcement trying to keep the park clean, but there is no police force shutting down all access to the park and putting the gardener in jail.

In the end, this filehost thing is here to stay, because it mimics something we take for granted in real life. Renting out something to other people without being liable for their actions. Sooner or later this is a model content producers will use to distribute intellectual property. Without the help of major labels and that makes them more nervous than anything else. The first company to figure out how to keep it clean and keep the revenue flowing is going to butcher the established media conglomerates; at least in the online space.

Posted:2 years ago

#22

Tony Johns

520 12 0.0
The FBI should not be doing that in regards to copyright infringement, because they don't have the SOPA or the PIPA laws yet in place.

However I have never really agreed with the way that Megaupload tries to make users sign up for menbership for faster downloads either.

When I download niche Japanese games from any site, I would gladly wait as long as I can for a great game that I can never get in physical copy all because it is not available to me by any other means.

I never try to sign up to any membership because giving money to a site that does not own the material that I am downloading does not sit right with me, I would rather give my money to the people who created the game in the first place.

But if there is no way for me to buy the game because their game is only sold in Japan, then I have to download it for free even though I wish I could really support the company who makes the games that I downloaded.

It is hard to be a fan of Japanese games that often are in a niche market. :(

And with things like this going on, I wonder how long I could be able to play the games I like if they are not even avaliable for me to download at all online and at physical copy where I could support the small japanese developers.

Posted:2 years ago

#23

Neguceanu George
Level Designer / Web Design - Promotion

5 0 0.0
Old 'SOPA' in action. Very sad day, but its not the first time FBI plays the puppets for Corporations.

And we will close our eyes and continue to be ignorant because we are taught like that...



Posted:2 years ago

#24

Tin Katavic
Studying MSc-Games Technology

44 3 0.1
I cant help but wonder how did they come up with the "conspiracy to commit racketeering" and "conspiracy to commit money laundering" charges. I get a feeling they tacked those two on just cause they have a huge sentence going with them (up to 20 years it seems).

As for paying for faster downloads or not limiting the amout of time you can spend viewing a movie on Megaupload - I cant say I had a problem with the concept. Kinda like traveling coach or first class - want more comfort - pay more. Same deal on most big share sites. Some dont even have the free option.

"making more than $175 million from illegal activities" ... anyone else get the feeling we are in the wrong business? :D

Edited 1 times. Last edit by Tin Katavic on 23rd January 2012 11:09am

Posted:2 years ago

#25

Sam Twidale
Studying Computer Systems and Software Engineering

2 0 0.0
You've got to wonder how the Megaupload issue will affect American public opinion on piracy. God forbid the idea of the pro-SOPA/PIPA crowd actually getting significant grassroots support of their own.

Article is definitely right to speculate about the exact timing!

Posted:2 years ago

#26

gi biz
;,pgc.eu

341 51 0.1
@Tony: I think this is an international law, that downloading copyrighted material that you cannot buy elsewhere in your country is perfectly legal, so no need to justify.
That's what makes fansubs legal, and that's why you often read the disclaimer "please delete this fansub when this anime becomes available in your country".
I guess something like that happens for abandonware and old games (ie: try to find an original Street Fighter 2 for dos if you can). Anyways companies usually don't care about those because even if you found the original, it would be second hand.

Posted:2 years ago

#27

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