Bloomberg News

Megaupload Trying to Avoid Court Procedures, U.S. Says

February 14, 2013

Megaupload.com, the file-sharing website closed by the U.S., is trying to circumvent criminal procedure rules with claims including an accusation the government lied to get search warrants, prosecutors said.

The website’s claims are unfounded, they said in a filing yesterday in federal court in Alexandria, Virginia. The U.S. accused Megaupload of generating more than $175 million in criminal proceeds from the exchange of pirated film, music, book and software files when it shut the site last year.

The U.S. and Megaupload are in dispute over the file- sharing site’s request to be allowed to take part in a civil lawsuit, filed by a U.S. man seeking to recover the data he stored on the website. Megaupload claims the U.S. misled the courts in obtaining warrants to shut down its websites, while the prosecutors argue the file-sharing site is seeking to illegally get information to defend itself in the criminal case.

“Megaupload has supplied nothing but a conspiracy theory,” in an attempt to be included in the civil lawsuit, the U.S. said in its filing. “Megaupload should not be able to use its participation in civil litigation as a sword to circumvent criminal discovery rules.”

Kyle Goodwin, who had started a business reporting on local high school sporting events in Ohio and stored videos on Megaupload, sued the U.S. to recover those files. The judge ruled he couldn’t make a decision without an evidentiary hearing.

Megaupload sought to intervene in the case, arguing it has relevant facts and is in the best position to retrieve Goodwin’s data. It said the issues of data preservation and consumer access are linked to its criminal defense.

Mega Conspiracy

Kim Dotcom, 39, the founder of Megaupload, was indicted in what U.S. prosecutors dubbed a “mega conspiracy.” If convicted, he faces as long as 20 years in prison for each of the racketeering and money-laundering charges in the indictment.

The U.S. shut down Megaupload without notice after charges against seven individuals, including Dotcom, were unsealed in court in January, 2012.

Megaupload’s lawyer Ira Rothken said in an e-mail today that the U.S. is trying to concoct a way out of taking responsibility for injuring millions of consumers.

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.

German-born Dotcom was arrested at his home 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 August.

Dotcom has began operating a successor website called “Mega” from New Zealand. In less than a month, the site is hosting more than 100 million files, Dotcom said on Twitter today.

The case is USA v. Dotcom. 12-cr-00003. U.S. District 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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