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File-sharing kingpin arrested in New Zealand at US request

Megaupload.com founder Kim Dotcom (aka Kim Schmitz) and three others are due to appear in the North Shore District Court this afternoon following their arrest in Auckland today at the request of United States officials.  

A US Department of Justice indictment accuses Mr Dotcom's music and movie file sharing site of causing estimated harm to copyright holders in excess of $US500 million and the conspirators earned more than $US175 million in illegal profits through advertising revenue and premium memberships. 

New Zealand Police said they executed ten search warrants at residential and business addresses across Auckland this morning as part of their actions against Megaupload.

Arrests were made in Coatesville, north of Auckland, and the Auckland waterfront suburb of Orakei.

The raids were organised in cooperation with the FBI, police said. Four FBI agents are in NZ.

Mr Dotcom - accused of infringement, racketeering and money laundering by the FBI - has been living in the Chrisco mansion in Coatesville.

Auckland lawyer Rick Shera, who drove past the $30 million, 120-acre property this morning, told NBR that the properties multiple entrances were all blocked by police cars this morning. Neighbours told Mr Shera that the police helicopter had also been circling.

When an NBR reporter arrived on the scene around 11am, it was still swarming with police.

Assets seized
In a statement the Police said $6 million of assets were seized, including a Rolls Royce Phantom Drophead Coupe valued at more than $500,000.

Police said more than $10 million has also been seized from NZ financial institutions. The money has been secured by New Zealand's Official Assignee pending the outcome of legal proceedings.

Megaupload.com is currently unavailable.

Extradiction proceedings
Detective Inspector Grant Wormald of OFCANZ says today's arrests were the result of several months coordination with the FBI and US Department of Justice.

"The FBI contacted New Zealand Police in early 2011 with a request to assist with their investigation into the Mega Conspiracy." said Mr Wormald.

"We were happy to provide this assistance. Staff from OFCANZ and New Zealand Police have worked with the US authorities over recent months to effect today's successful operation.

"All the accused have been indicted in the United States. We will continue to work with the US authorities to assist with the extradition proceedings." said Mr Wormald.

The other three arrested
The FBI said the three arrested were the company's chief marketing officer, Finn Batato, chief technical officer, co-founder and director Mathias Ortmann and Bram van der Kolk who oversaw website programming and network structure overseer, the Federal Bureau of Investigation (FBI) said on its website (see the FBI's full statement here).

The FBI said the seven individuals and two corporations, Megaupload and Vestor, were indicted on January 5, charged with engaging in a racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering and two substantive counts of criminal copyright infringement.

The indictment called the outfit an "international organized criminal enterprise allegedly responsible for massive worldwide online piracy of numerous types of copyrighted works through Megaupload.com and other related sites."

Along with the arrest, the FBI said more than 20 search warrants were executed today in the US and eight countries, seizing approximately $US50 million in assets and targeted sites where Megaupload has servers including in Ashburn, Washington DC, the Netherlands and Canada.

The indictment claimed the enterprise was led by Kim Dotcom and Kim Tim Jim Vestor, the FBI said.

The indictment said the enterprise had operated websites which illegally reproduced and distributed infringing copies of copyrighted works, including movies and music, the FBI said. 

The indictment alleges the estimated harm caused was in excess of $US500 million and the conspirators earned more than $US175 million in illegal profits through advertising revenue and premium memberships. 

Among the organizations that provided "substantial and critical assistance" were the New Zealand Police, the Organised and Financial Crime Agency of New Zealand (OFCANZ), the Crown Law Office of New Zealand,and the Office of the Solicitor General for New Zealand, the FBI said.

This morning Twitter was abuzz with the news, with many commenting on the recent anti-infringement legislation SOPA and PIPA.

The Wall Street Journal reported that investigators said there was no link between the recent protests against this legislation.

Anonymous takes down US Department of Justice and Universal Music sites
The hacker collective Anonymous has shut down the websites of both the United States Department of Justice and Universal Music, according to media. The Justice website has been up and down.

News website RT reported that the group shut down both websites in retaliation for the action against Megaupload.

“It was in retaliation for Megaupload, as was the concurrent attack on Justice.gov,” An Anonymous operative, Barret Brown, told RT.

Mr Brown reportedly said that more such action was coming.

A Twitter account affiliated with the group, @YourAnonNews, took responsiblity for the attacks, saying it was Anonymous' largest attack ever, with 10 sites down in 20 minutes.  These included mpaa.org and riaa.org.

The site www.downforeveryoneorjustme.org said the DoJ site, riaa.org and universalmusic.com were down, but mpaa.org was up at time of writing.


Kim Dotcom
The German-born multi-millionaire’s bid to buy the Chrisco mansion in Coatesville, north of Auckland, was  knocked back by the Overseas Investment Office (OIO) last year, as reported by NBR.

Mr Dotcom’s application to buy the homestead he rents at 186 Mahoenui Valley Rd in Coatesville, north of Auckland - one of the priciest homes in the country - was declined on the basis of new section 16 additions to the Overseas Investment Act. This includes criteria for relevant business experience, financial commitment and good character.

Mr Dotcom and his family were granted residency last year. Information provided to the OIO indicated the Dotcom’s do not intend to reside here indefinitely.
They have been renting the Coatesville mansion built by Chrisco founders Richard and Ruth Bradley.

Mr Dotcom is the sole shareholder of Megastuff, which has two directors Andrew Bowden and Peter Brooke

A third director, Wayne Tempero (a bodyguard who formerly worked for Brad Butterworth and Russell Coutts) resigned in August.

Comments and questions

Free Trade?

Who do you think will be paying for the levvies lost? They won't vanish. They impact will be transferred to whom do you think?

Tell me again why we need SOPA, DMCA, and s92a when a proper investigation and legal approach can be used to arrest Kim Dotcom?

This is legal? http://newzealand.usembassy.gov/uploads/images/o16y8MOyHW2l-jJTxaMpeQ/ExtraditionUSNZ.pdf
Is it possible they tacked a money laundering charge on so they could extradite?

I care less about Kim Dotcom's real estate plans and more about how it is possible for the United States Justice Department to make arrests in New Zealand based upon copyright infringement.

Its not copyright. Its $175,000,000 of money laundering, and the proceeds of crime from copyright infringing. NZ US have a co-extradition agreement. Simple. You live in a cave right ?

...I completely agree. And what's more, who gets the bill for this over-the-top police operation? I'm guessing the NZ tax payer - this this true?

America's "Justice" system run amok.

This after one of the media companies illegally took down a musical ad Megaupload had made.

What is really going on here? (And does anyone really believe the money laundering charge afterthought designed to make things look more reasonable?)

Also, why is NZ bending over and grabbing its ankles in front of the US again?

it shows true criminals get busted without this latest crazy legislation.

MAFIAA telling the US what to do, in turn giving orders to NZ, and we just roll over. Are we just employees of the copyright trolls?

I live close by, there were helicopters overhead during what I assume was the arrest, full drama

From the comments above, I despair sometimes at how naive and complacent New Zealanders can be at times.

Wake up and smell the coffee. Lax company laws and an indifferent attitude to corruption make NZ the perfect haven for money laundering and conspiracy. Smile and wave, put on a firework show and donate to charity, your neighbours won't suspect a thing.

.... and the Chinese communists govt is going to buy the Crafar farms from dimwit Stiassny who couldn't be arsed to sell them off individually ... what's wrong with this country?

Megaupload facilitates people hosting and posting files that are too large to email. That's it.

MegaUpload swiftly removes violating content, which some people will inevitably post just as they do on YouTube.

This is exactly what YouTube does.

So...what exactly is criminal here?

The trumped up money laundering charge is probably what was required to get the NZ police to jump.

LOL. Clearly you've never issued megaupload with a DCMA takedown notice for infringing files. We have. On several occasions, nothing was ever done.

Megaupload was far from a legitimate file sharing service. These guys played with fire, now they're getting burnt. Lesson to all, don't be an a-hole, karma is real.

This certainly shows that the US authorities can more or less do what they like without SOPA being passed into law.

Of more concern to me is the fact that Mr Dotcom was not allowed to buy property because he didn't pass the good character test, yet NZ granted him and his family full residency. The expression "Banana Republic" springs to mind.

The US seems to be moving out on all fronts against the ability for individuals to disseminate information electronically. The current guise for this action is in defence of the hard work of copyright holders against pilfering pirates - a claim which is, as all good facades are, not without some legitimacy.

Normally, I would be the first to scoff at an apocalyptic portent of an inevitable "slippery-slope", but I really, truely want to know: where are they going to stop?

If, in some future where the US corporates are allowed to enforce copyright to the fullest extent of their whims, I unknowingly link to a site which a holder asserts to have breached its copyright, am I going to be extradited?

http://www.guardian.co.uk/law/2012/jan/13/piracy-student-loses-us-extradition

Maybe if we had the fbi investigating our finance companies the wreckage would have been a lot less

What...?

Are you seriously trying to say the US did a better job of policing their finance sector than NZ has?

Or have I missed the public service announcement about "Pull Your Leg Friday"?

...I wonder when the police will find the guys that stole my TV...they obviously have a lot of time on their hands to be wasting on copyright issues...

Price for holding some of the most boring xmas parties in NZ history.

Poor old John Key. Rolling over and taking it from the U.s in the vain hope he'll get a real free-trade deal one day.

@ @Christype: yes. We have extended the application of the Extradition Act to the United States, which means that any offence punishable by 12 months or more (and not just those listed in the treaty) is potentially extraditable.

Thanks for clarifying. Stinks all the same.

Dear NZ, it's time to bend over for the US govt. Again.

Reading these comments is sometimes entertaining, sometimes educational, but the majority of the ones here are from the American McCarthy era, a Red under every bed. Anonymous | Friday, January 20, 2012 - 10:20am summed it up well. But then we have Anonymous | Friday, January 20, 2012 - 10:26am Crafar Farms…, and Anonymous | Friday, January 20, 2012 - 10:54am, John Key…. Just to mention two of the most way out there conspiracy theory’s. Just what the heck has this Megaupload story to do with Crafar, and for goodness sake do you really think John Key was consulted on this business. Surely there is more important things for our prime minister to be involved with. Come on be amusing be educational but for goodness sake be real!

If MegaUpload were actually complying with DMCA takedowns as they claim then the ramifications of this are huge...

Why do we let the racketeers with the guns, executing the copyright-racket extend their racketeer-alleging racket into our shores?

Copyright is a perversion of the institutions of property, and copying data ought not even be a civil infringement, let alone a criminal one. Copyright has no basis in customary or common law, and it an unnatural institution whereby the state grants additional rights at the expense of others. For more on this topic: http://www.lostsoulblog.com/2010/08/intellectual-property-and-international.html

Copyright encourages investment, invention and innovation.

While it may encourage some types of investment, innovation, intention and innovation, it does not follow that these have net social benefits. Other types of investment, innovation, invention and innovation are hampered by this artificial institution, and a full assessment must include all effects. Can you provide any good evidence that the institution of copyright beings about net social benefits?

@Anonymous - re: Free-trade
I agree - that's way I said it's a vain hope - it'll never happen because they are too scared of pissing off the subsidised farmers, etc

yep - good point but, it will happen. just that the burdon is/will be passed onto those who have absolutely no connection with the 'trade' whatsover. guess the two groups :-)

some background on him http://en.wikipedia.org/wiki/Kim_Schmitz

David, can you provide any evidence that free, unrestrained copying of creative works wouldn't decimate the likes of the film and music industries? It doesn't take a genius to see the crash in music sales in the last 10 years or so.

Copyright is a natural extension of property rights to intangible assets.

The burden of proof is on those who would restrict freedom in the name of innovation, not on those who would not. Clearly many business models and particular investments would by changed were these restrictions removed, however it does not follow that the wealth of society would be diminished: typically freedom results in business models that unleash greater wealth and I've not seen any good arguments that it would not be so in this area.

The extension of property rights to intangible assets is unnatural. Naturally, property rights are recognised over scarce resources.

'if you copy a book I have written, I still have
the original (tangible) book, and I also still “have” the pattern of words that constitute the book. Thus, authored
works are not scarce in the same sense that a piece of land or a car are scarce. If you take my car, I no longer have it.
But if you “take” a book-pattern and use it to make your own physical book, I still have my own copy. The same holds true for inventions and, indeed, for any “pattern” or
information one generates or has. As Thomas Jefferson— himself an inventor, as well as the first Patent Examiner in
the U.S.—wrote, “He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.” Since use of another’s idea does not deprive him of its use, no conflict over its use is possible; ideas,
therefore, are not candidates for property rights.' from http://mises.org/books/against.pdf (this source is a good primer on the topic and references studies on costs and benefits of copyright and other 'IP' restrictions )

Goodness me, David, so you're some sort of Christian Anarchist. Copying is theft.

A very good Libertarian critique correctly justifying copyright as a legitimate property right, can be found here.

""Patents and copyrights are the legal implementation of the base of all property rights: a man's right to the product of his mind." Ayn Rand.

And this's is the only post I'll make on this for arguing copyright with a thief is as pointless as arguing belief with a Christian. In both you have to forsake reason to get to your ends.

David, perhaps you could explain the technology you use to post these comments and set out a real world scenario that leads to their invention, production and distribution without IP laws.
Alternatively I claim to be the original author of the phrase "a fool and his folly are not easily separated".

No, the onus is not on me to demonstrate the how of commercial endevours. I don't favour markets because I know what they will do and how, I favour them at least partly because I don't know and don't need to know, in order to have confidence in their function and merits. Information about what people want is dispersed, as is information about the resources available, and their costs, and the technology available to put them to use. I do not need to aggregate, analyse or understand this information, in fact such aggregation into a single mind is impossible, and the attempt, under central economic planning is counter-productive. The term 'competition' in economics is much wider than price competition, the most important types of competition are between different business models and different customs and methods of production and service. (Unfortunately it appears this type of competition is invisible to many people.)

Without IP restrictions surely the technology we use would not exist in its present form, instead other technology would exist, and it would have a different form. This does not mean it would not serve the same function, or that it would not serve the same function better. It is of course impossible to set out a real world counter-factual. What the world would be like with different institutions is necessarily an exercise of the imagination, where typically arguments by analogy are appropriate. Thankfully we have no shortage of analogies of different kinds of order emerging without being driven by state legislation and its creation of artificial rights. The study of such analogies is not folly, rather it can produce wisdom. (Wisdom being not just knowledge, but its application and use to serve human ends and flourishing.)

David your reply is evidence enough that good ideas are indeed scarce.

I think the way you are using the word scarce is in the sense of valuable or uncommonly valuable, which is different from the way Kinsella who I quoted is using it -- in the sense of rivalrous in consumption (sorry to use economic jargon)

At anonymous, so what if the traditional avenues for selling music have crashed in the past ten years. This hasnt translated into a decline in music production. In fact the exact opposite is true, with the rise in new digital technologies for music production the ability for individuals to record and produce music is expanding exponentially. THe only thing that has changed is that now the actual artists rather than the corrupt media companies are reaping the rewards of their own work! Digital reproduction of work is totally costless and involves no extra work on behalf of the artist, what it actually does is provide a totally free massive advertisement tool for said artists. People who appreciate their work can then attend their shows or pay for high quality digital downloads. The fact that traditional music companies are loosing revenue is a direct consequence of them not being able to adapt to a changing world.

"Copyright encourages investment, invention and innovation"

of course but there was not only illegal content on megaupload...

Have a look on
http://www.alternativemegaupload.com/ to get an alternative to megaupload!

Kim (dotcom) Schmitz has previously worked both for and against US intelligence agencies, hacking.

Guess it was time to bring their boy in for a debrief ... bit over the top with the helicopters, jack-boots, etc .... some provincial cops shooting their wad I spose.

With a record as listed on Wikipedia - how on earth did he get residency in NZ - who gave it to him and how much did he pay?

Incredible!

The effective hacking group Anonymous has taken out a load of sites in retaliation, including Universal Music, EMI, MPAA and even the FBI. These are not people to be messed with.

http://gizmodo.com/5877679/anonymous-kills-department-of-justice-site-in-megaupload-revenge-strike

Whoops - here's a working link.

http://gizmodo.com/5877679/anonymous-kills-department-of-justice-site-in-megaupload-revenge-strike

They finally got "Kimble" the loud-mouthed, showoff, who thought he was invincible. Scamming money using other peoples works. It's about time. I hope they were thorough and the charges stick.

Umm is tax evasion in there too? Perhaps it will be when multiple governments realise they've been missing out on some of the bounty.

Our government spent two years investigating copyright infringement but it won't investigate wallstreet. Way to go you progressive pieces of cow dung.

Tip of the iceberg . So much underhand stuff going on which the authorities would never have the time or ability to flush out ,so its easier to turn a blind eye to it(until the US Feds get on the case!) NZ really is a pushover...pathetic and sad .

Comments closed on “Kim Dotcom remanded in custody”.
TV3 News 6pm. Got NZ Residency because he paid $10 million!
How many police involved in arrests?
Pity kiwi’s trying to get satisfaction for their problems.
Are your “spies” reading this John Key?

The police have no role to play in these copyright, commercial secrets and IP disputes, which should be resolved in civil courts. Let's not forget about violent offenders, people that steal tangible property and commit fraud

This is a dispute over business models, plain and simple. State thuggery on behalf of record companies and film studios, like that on display in North Auckland today has no place in New Zealand.

Our diggers died in wars 'over there' to stop this kind of crap.

So what happens to the users of Megaupload who had legitimate use for file sharing/storing and may have had business related material stored on their servers?
Class action lawsuit against the FBI/US Government??

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