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  • 01/20/2012
    1:17 PM
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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

But authorities have accused the site of downplaying copyright violations that occurred on the site, while actively promoting those violations for their own profit, including earning at least $150 million by offering premium subscription services to its uploaders. According to one chat transcript from 2008 quoted by investigators, for example, Bram van der Kolk, a Dutch citizen who oversaw Megaupload's programming and network infrastructure, allegedly said, "We have a funny business ... modern day pirates :)." In response, CTO Ortmann said, "We're not pirates, we're just providing shipping services to pirates :)".

According to the indictment, "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." In addition, it said that Megaupload offered financial incentives to people who uploaded popular content, and even to "users whom they specifically knew uploaded infringing content." Uploaders could receive $100 to $300--or occasionally up to $1,500--for each month that they uploaded popular material, even while Megaupload paid little to the owners of the copyrighted works from which they profited.

Furthermore, authorities accused Megaupload of running a bait-and-switch maneuver when copyright holders requested that their material be expunged from the site. While the site offered copyright holders a tool to automatically do that, in fact the tool would typically only remove a single link to the file, while leaving other links to the same file intact. By not offering a public search function for all files that it hosted, and relying on third-party sites to list links, authorities said that Megaupload managed to obscure this practice.

Megaupload, at least at one point, considered itself the thirteenth-most-visited site on the Internet, and until its shutdown, was renting 525 servers in Virginia from Carpathia Hosting and 630 servers in the Netherlands from Leaseweb, amongst other locations and hosting providers. To support that infrastructure, authorities alleged that between 2007 and 2010, Megaupload executives used PayPal to transfer $13 million to the chief financial officer of Carpathia Hosting, and at least $9 million to Leaseweb. Numerous other payments were made via bank transfers.

Megaupload's executives appear to have recently begun pursuing a legitimacy campaign based on trashing their rivals. The indictment quoted an email from Megaupload CEO Dotcom to PayPal in October 2011, in which he said Megaupload was about to file suit against rivals over their practice of paying for pirated content. "They are damaging the image and the existence of the file hosting industry (see what's happening with the Protect IP Act)," said Kim. "Look at Fileserve.com, Videobb.com, Filesonic.com, Wupload.com, Uploadstation.com. These sites pay everyone (no matter if the files are pirated or not) and have NO repeat infringer policy. And they are using PayPal to pay infringers." Interestingly, those are some of the exact charges that have since been leveled by authorities at Megaupload's executives.

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