Bloomberg News

Megaupload Founder Seeks Bail in New Zealand Court Hearing

January 23, 2012

(Updates with court appearance in second paragraph.)

Jan. 23 (Bloomberg) -- Megaupload.com’s founder reappeared in a New Zealand court today after the file-sharing website was shut by the U.S. government as part of an alleged $175 million copyright infringement conspiracy.

Kim Dotcom, 37, the website founder who legally changed his name from Kim Schmitz, and three other men are appearing in North Shore District Court in Albany, a suburb of Auckland, seeking bail, according to a court spokeswoman who declined to give her name per court policy. She said the hearing would probably go most of the day.

The four men were arrested Jan. 20 on U.S. charges of criminal copyright infringement and money laundering, according to a New Zealand police statement. Three others remain at large, the U.S. Department of Justice said in a Jan. 19 statement.

The arrests occurred as the U.S. Congress considers anti- piracy legislation supported by the movie and music industries that prompted a backlash from companies including Google Inc., the nonprofit Wikimedia Foundation Inc. and Web consumers. Opponents say the Stop Online Piracy Act in the House and the Protect IP Act in the Senate would promote censorship, disrupt the Web’s architecture and harm their ability to innovate.

Votes on the U.S. bills were postponed after legislators withdrew support following the online protests.

The Megaupload conspiracy was led by Dotcom, a resident of Hong Kong and New Zealand, and a dual citizen of Finland and Germany, who founded Megaupload Ltd., according to the indictment. Police also arrested a Dutch citizen who lives in New Zealand and two German nationals.

Electronic Locks

When police arrived at Dotcom’s Auckland home on Jan. 20, he entered his house and activated electronic locks, Detective Inspector Grant Wormald said in a statement. Police neutralized the locks and cut their way into a safe room, where Dotcom was found with what looked like a sawed-off shotgun, Wormald said.

New Zealand police said they carried out 10 search warrants and seized 18 luxury vehicles, including a Rolls Royce Phantom Drophead Coupe and a 1959 pink Cadillac. The vehicles are valued at NZ$6 million ($4.8 million). Police said as much as NZ$11 million in cash was restrained in various accounts.

New Zealand opposition politicians want an inquiry into how Dotcom was able to stay permanently in Auckland, the stuff.co.nz website reported. He was able to settle there after investing NZ$10 million in government bonds in 2010, the website reported.

Renovations

Dotcom spent NZ$4 million renovating his home after moving in, the New Zealand Herald’s website reported, citing people it didn’t identify. A graffiti-style painting of Dotcom and his wife was displayed on the wall of one room, which had about seven 60-inch television screens, the website reported.

Investigators executed more than 20 search warrants in the U.S. and eight other countries and seized about $50 million in assets, the U.S. Justice Department said in a Jan. 19 statement. Since September 2005, the conspiracy -- dubbed “Mega Conspiracy” by prosecutors -- generated more than $175 million in criminal proceeds by distributing millions of copies of copyrighted works, including movies, television programs, music, books, video games and software, according to the indictment.

Megaupload is advertised as having more than 1 billion visits to the site, more than 150 million registered users, 50 million daily visitors, and accounts for 4 percent of Internet traffic, prosecutors said.

--With assistance from Tom Schoenberg in Washington. Editor: Joe Schneider, Ed Johnson

To contact the reporter on this story: Chris Bourke in Wellington at cbourke4@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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