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Megaupload Execs Had Thing For Bling, Indictment Shows

Indictment in Megaupload case reveals intriguing details, including assets that could be seized by the Feds. For starters, think $8 million allegedly spent on yacht rentals, 15 Mercedes-Benzes, and a Rolls-Royce with this license plate: GOD

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The Justice Department Thursday unsealed an indictment in Virginia charging seven executives at file-sharing site Megaupload.com with copyright violations, racketeering, and money laundering. Four of the people charged, including 37-year-old Megaupload CEO and founder Kim Dotcom (aka Kim Tim Jim Vestor, aka Kim Schmitz), were arrested by New Zealand authorities, while the others remain at large.

The feds accused Megaupload of amassing $175 million "in criminal proceeds" since the site was founded in 2005, which they said was used for everything from leasing servers and rewarding uploaders to buying high-end cars and renting yachts. In 2010, according to the indictment, Kim alone earned $42 million, while Mathias Ortmann, a Germany citizen who served as Megaupload's CTO, earned over $9 million.

Having the FBI coordinate international anti-piracy arrests and 18 related domain-name seizures just one day after mass protests against SOPA and PIPA produced a predictable response: The hacktivist collective Anonymous retaliated by launching denial-of-service attacks against 10 websites, including those of the DOJ and FBI, as well as the Motion Picture Association of America, the Recording Industry Association of America, and even the U.S. Copyright Office.

[ Be more secure this year. Read 10 Security Trends To Watch In 2012. ]

But it's clear that the feds didn't build their case overnight. Indeed, the DOJ's indictment against what it dubs the "Mega Conspiracy" reflects an investigation that took two years to build.

If convicted of all five charges in the indictment, the defendants face up to 55 years in prison. But Owen Seitel of Idell & Sietel LLP, an entertainment and IP law firm, told VentureBeat that "indictments by their nature are overreaching," and to not expect that all of the allegations would stand up in court. Furthermore, a lawyer for Megaupload told the Guardian that the the company would "vigorously" defend itself.

If the defendants are found guilty of any of the five counts with which they're charged, federal authorities would attempt to recover all assets they'd obtained via illegal activities, or an equivalent dollar amount. As part of the indictment, authorities listed those assets, which include everything from fiberglass sculptures and a jet ski to televisions and Dell servers. Authorities also want to recover $8 million allegedly paid by Megaupload in 2011 solely for Mediterranean yacht rentals. Other interesting assets listed include numerous cars owned by Megaupload's executives, including a Lamborghini, a Maserati, as well as 15 Mercedes-Benzes bearing such license plates as "GOOD," "BAD," "EVIL," "STONED," and "GUILTY," and one Rolls-Royce Phantom bearing the license plate "GOD."

Megaupload billed itself as an online storage locker for movies, music, and other files. For example, in response to an email from a copyright holder in 2007--contained in the indictment--which warned CEO Dotcom that he legally couldn't profit from other people's copyrighted works, Dotcom sent back this message: "We are a hosting company and all we do is sell bandwidth and storage. Not content. All of the content on our site is available for 'free download.'"

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Guest,
User Rank: Apprentice
1/22/2012 | 11:03:33 PM
re: Megaupload Execs Had Thing For Bling, Indictment Shows
There is no need for a "balance to be struck" with the Motion Picture industry. They do not get their own version of the law. The balance has been struck in the legal process. We are not throwing out due process and the presumption of innocence because it doesn't suit their interests.

From a business perspective, this is entirely the wrong approach for the Motion Picture industry to take. See how well it worked for the recording industry when they took down Napster? The recording industry became detested, not Napster, and 100 other sites rose up to replace Napster. 1) Without basically shutting down the internet, you are never going to keep up with all of the pirate sites. 2) The way to handle this is to offer a premium experience that the pirates cannot offer (i.e. iTunes or YouTube ad revenue for the recording industry). They are currently trying to fight a force (the internet) which they cannot control with all of the FBI raids in the world. Innovate the business model, don't try to sue your way to success.
westsyde
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westsyde,
User Rank: Apprentice
1/21/2012 | 6:26:04 PM
re: Megaupload Execs Had Thing For Bling, Indictment Shows
The great intellectuals here at InformationWeak do not seem to possess much intellectual curiosity - the disgrace of the US Government with its actions on the dajaz1.com site takedown, denial of due process, and unnecessary secrecy should scare the propeller cap off of your head.

Given their track record, this attack on Megaupload has all the makings of another bogus seizure.

As far as the 'bling' factor goes, name me a CEO of a large corporation in America who does not possess and flaunt similar opulence? What this article is in reality - a lame attempt to disparage Megaupload's CEO. Are you trying to assist the feds by convicting Megaupload in the court of public opinion? I would fire your attorneys, your case is weak.
Bprince
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Bprince,
User Rank: Apprentice
1/21/2012 | 2:11:56 AM
re: Megaupload Execs Had Thing For Bling, Indictment Shows
@readers - since many have brought up the subject of people using the site legitimately, what should the government and record/movie industry do to enforce copyrights on sites such as Megaupload? Is there any balance to be struck here?
Brian Prince, InformationWeek/Dark Reading Comment Moderator
CMOONEY152
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CMOONEY152,
User Rank: Apprentice
1/20/2012 | 7:34:49 PM
re: Megaupload Execs Had Thing For Bling, Indictment Shows
Simple, obvious, not at all insightful. How about you take on a reporting challenge?

Wide and "popular" reports about infractions and assets of Megaupload's primaries, ignore those who were using Megaupload for legitimate purposes. Wide reporting about "Anonymous" driving the largest cyber attack to date, ignore that the FBI's shutdown of Megaupload as the largest cyber attack ever. We all already know Megaupload's primaries and Anonymous are out of control and should face justice. But, I hope some of the legitimate users damaged by poorly implemented law enforcement are able, and motivated, to legally pursue both restitution and punitive claims since the media seems not to have the guts to take on a true journalistic challenge. That is: I hope someone makes all us (U.S.A.) pay for allowing our FBI to act so irresponsibly, and that such pain will effect changes, since there seems no other way their actions will be revealed, evaluated, and corrected.

I would expect Information Week to look more into the deep impacts of these events, rather than this Paparazzi style fluff.
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