Monday, February 6, 2012

Megathis and megathat

Prison ?It has been a few weeks since police swooped on "Mega Conspiracy" member Kim Dotcom and his buddies in a sleepy suburb north of Auckland. Since then we've seen the media chasing a story, and the politicians chasing the media.

We've heard from his neighbors that he drove too fast. We've heard from a school teacher that he was an antisocial child. We've heard from colleagues that he had some sort of ego complex. We've seen the minor Government parties questioning the decision to grant him residency in New Zealand.

So what was he actually doing?

Kim Dotcom and his buddies were operating what they called a "cyberlocker" site, a private data storage provider. What they were actually doing is a little unclear. His legal team would say he's operating some sort of safety deposit box. Prosecutors would say he's operating a digital crack house. The truth is probably somewhere in between.

The website worked a bit like this: An internet user uploaded a computer file. reproduced the file on at least one of its computer servers. generated a unique Uniform Resource Locator or URL for that file. The user, or someone else, could then download the file once given the URL.

So what's the problem?

Well, quite a lot. According to a Grand Jury Indictment filed Jan 5, 2012, Kim Dotcom and his pals were members of a "Mega Conspiracy"; alleged to be:
a worldwide criminal organization whose members engaged in criminal copyright infringement and money laundering on a massive scale with estimated harm to copyright holders well in excess of [US]$500,000,000 and reported income in excess of [US]$175,000,000.
In my view those numbers are pretty staggering. But that's all they are. Just numbers. There will hopefully be a lot more detail forthcoming as to how those numbers are calculated.

The site claims to have had more than one billion visitors in its history, more than 180,000,000 registered users to date, an average of 50 million daily visits; and to account for approximately four percent of the total traffic on the Internet.

The specific counts against Kim Dotcom and his pals include:
  1. Conspiracy to commit racketeering

  2. Conspiracy to commit copyright infringement

  3. Conspiracy to commit money laundering

  4. Criminal copyright infringement by distributing

  5. Criminal copyright infringement by electronic means
My colleague Simon Fogarty sums it up very succinctly in a recent article as saying:
'the prosecution depends on the defendants' knowledge that there was illegal file-sharing going on; that they encouraged it, that they made money from it, and that they paid rewards to users who contributed to it.'

Conspiracy to commit copyright infringement

The conspiracy count makes for the most interesting reading.

Reproducing copyright works

The Mega Conspiracy operated a whole bunch of websites.  One of these, called, was for users who did not want to download whole copies of content.  They could stream them. Just like YouTube. In fact, exactly like YouTube. The Mega Conspiracy is accused of reproducing copyrighted works directly from

One of the intercepted emails between conspirators Bram van der Kolk and Mathias Ortmann reads:
"Do we have a server available to continue downloading of the YouTube's vids? ... Kim just mentioned again that this has really priority."
Reward payments

The Mega Conspiracy is alleged to have provided financial incentives for users to upload infringing copies of popular copyrighted works.  The Conspiracy made payments to uploaders who were known to have uploaded infringing copies of coprighted works.

Bram van der Kolk commented on one of the users deemed eligible for payment as follows:
"Our old famous number one on MU, still some illegal files but I think he deserves a payment".
Reproduction and distribution

Members of the Mega Conspiracy are alleged to have willfully reproduced and distributed infringing copies of copyrighted works using computer servers controlled by the Conspiracy.

Alleged conspirator Julius Bencko sent a few emails to Bram van der Kolk, like this one:
"the sopranos is in French :((( fuck.. can u pls find me some again?"
And this:
"can u pls get me some links to the series called "Seinfeld" from MU?"
 And this one too:
"sorry to bother but if you would have a second to find me some links for the "Grand Archives" band id be very happy."
Failure to remove

Members of the Mega Conspiracy are accused of not deleting infringing copies of copyrighted works from computer servers that they controlled, even when they were aware of the infringing material or the removal was specifically requested by the copyright holder.

There's this email from Kim Dotcom to Mathias Ortmann:
"Never delete files from private requests like this. I hope your current automated process catches such cases."
And there's this one from Dotcom to van der Kolk, Ortmann and Bencko:
"I told you many times not to delete links that are reported in batches of thousands from insignificant sources. I would say that those infringement reports from MEXICO of "14,000" links would fall into that category. And the fact that we lost significant revenue because of it justifies my reaction."
And this one:
"In the future please do not delete thousands of links at ones [sic] from a single source unless it comes from a major organization in the US."

There's plenty more stuff in the Indictment. And plenty more stuff to come I guess. Of course all of this is allegation.  There's still some proving to do.  But I think these guys have a bit of explaning to do.

Although not part of the specific charges, this email recorded in the Indictment from Dotcom sent to a PayPal, Inc. representative is quite ironic:
"We like to give you a heads up and advice [sic] you not to work with sites that are known to pay uploaders for pirated content. They are damaging the image and the existence of the file hosting industry... Look at,,,, 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."
Further steps

Kim Dotcom and pals Bram van der Kolk, Finn Batato and Mathias Ortmann are currently sitting in a New Zealand jail. They have been denied bail as they have each been judged to be a real and significant flight risk.  Dotcom has appealed that decision and failed.

The extradition process will now start. An extradition hearing is due on 22 Februrary. We'll be watching that with interest. It will highlight the complex interaction between the criminal provisions of the New Zealand Copyright Act 1994, the New Zealand Extradition Act 1999 and a 1970 Treaty on Extradition between the USA and New Zealand. If the extradition process is successful he will be hauled off to the United States to face the music there.

Back here in New Zealand we will be talking about it for a while. Politicians here are squabbling over whether the decision to grant Dotcom residency was the right one. There is an acknowledged inconsistency between the rules around immigration and foreign ownership. Dotcom was granted residency but he was prevented from buying land.

We'll also be looking at our intellectual property regime. We need to make sure that skilled migrants are moving here for the lifestyle rather than the opportunity to engage in criminal activity.

Photo courtesy of author maciek draba under Creative Commons licence.

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