Bloomberg News

U.S. Lied to Get Search Warrants, Megaupload Claims

January 02, 2013

Megaupload founder Kim Dotcom

Kim Dotcom, founder of Megaupload.com, is seen here in Auckland, New Zealand, on Feb. 29, 2012. Photographer Brendon O'Hagan/Bloomberg

The U.S. government lied to a court to get search warrants for computer servers in Virginia belonging to Megaupload.com., which is accused of orchestrating the biggest copyright-infringement conspiracy in U.S. history, the file-sharing website said.

The U.S. government had sought Megaupload’s cooperation in the investigation and the company agreed, unaware it was the target of the investigation, Megaupload said in a filing yesterday in federal court in Alexandria, Virginia.

“The government then came before this court, ex parte, with a selective, distorted account” to obtain the search warrants, Megaupload said in the filing. “The government deliberately misled the court that signed the search warrants and failed to disclose material exculpatory information.”

Kim Dotcom, 38, the founder of Megaupload, was indicted in what U.S. prosecutors dubbed a “mega conspiracy,” accusing his file-sharing website of generating more than $175 million in criminal proceeds from the exchange of pirated film, music, book and software files. If convicted, he faces as long as 20 years in prison for each of the racketeering and money-laundering charges in the indictment.

Megaupload filed the documents in a request to be allowed to take part in a hearing in Alexandria addressing the validity of the U.S. warrants.

A New Zealand judge ruled warrants used by police in that country to search Dotcom’s home were overly broad and invalid.

Megaupload Shut

The U.S. shut down Megaupload without notice after charges against seven individuals, including Dotcom, were unsealed in court on Jan. 19.

A Feb. 17 revised indictment includes charges of racketeering, money laundering, copyright infringement and wire fraud. The copyright-infringement charges carry a maximum five- year prison term.

The U.S. had notified Megaupload in June 2010 that its leased servers at Carpathia Hosting Inc. in Virginia had 39 infringing copies of copyrighted motion pictures. By Nov. 18, 2011, 36 of the films were still present on the servers, according to the U.S.

The U.S. paints Megaupload “as a brazen scofflaw,” that refused to remove the infringing content, the file-sharing company said. “The truth, as the government well knows, is quite different.”

Megaupload kept the files on the servers because the government told it to take no action that could disclose the existence of the investigation, the company said.

German-born Dotcom was arrested at his residence in an Auckland, New Zealand, suburb, in January last year and spent four weeks in jail before being released to await an extradition hearing, which is scheduled for March.

The case is USA v. Dotcom. 12-cr-00003. U.S. Distrcit Court, Eastern District of Virginia (Alexandria). The extradition case is between Kim Dotcom and Attorney-General. Civ 2012-404-1928. High Court of New Zealand (Auckland).

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net


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