FBI Shuts Down Megaupload File-Sharing Site With Online Piracy Indictments

By Fahmida Y. Rashid  |  Posted 2012-01-19

FBI Shuts Down Megaupload File-Sharing Site With Online Piracy Indictments

Just a day after a 24-hour blackout of popular Websites such as Wikipedia, Reddit and BoingBoing, which were protesting a pair of controversial anti-piracy bills making their way through Congress, federal law enforcement stepped in and shut down one of the world's largest file-sharing sites.

The 72-page indictment, unsealed Jan. 19, accuses seven individuals and two corporations, Megaupload Limited and Vestor Limited, of costing copyright holders more than $500 million in lost revenue from pirated movies and other content. The individuals face a maximum penalty of 20 years in prison on racketeering charges, five years for conspiracy to commit copyright infringement, 20 years on money laundering charges and five years on related charges.

The activist hacker collective Anonymous and allies were swift to launch distributed denial-of-service attacks in retaliation for the indictments and the takedown of the Megaupload site, blacking out a number of U.S. government and industry Websites. The sites-including the FBI, U.S. Department of Justice, U.S. Copyright Office and several entertainment giants, including Universal Music, Recording Industry Association of America and Motion Picture Association of America-were knocked offline Jan. 19 and remained unavailable for the remainder of the day and evening.

An online "locker" service, Megaupload allowed users to anonymously transfer large files by uploading them to the company servers and share the content via a unique URL. The indictment claims movies, television programs, music, ebooks and software were distributed through Megaupload's network of sites. The company allegedly made $175 million through ads that appeared on the site as well as by selling premium subscriptions to users, according to the Megaupload indictment, a copy of which is now available on Scribd.com.

"This action is among the largest criminal copyright cases ever brought by the United States," the Justice Department said in a statement about the indictment.

Authorities executed more than 20 search warrants in the United States and in eight other countries to shut down the site. Law enforcement has seized a number of servers and 18 domain names, including megaupload.com, used by Megaupload to operate the file-sharing services. The servers were located in the United States, Canada and the Netherlands.

Four of the seven people, including the site's founder, Kim Dotcom, formerly Kim Schmitz, have been arrested in New Zealand, the authorities said. The indictment claims Megaupload was the 13th most popular Website in the world. Kim Dotcom allegedly made more than $42 million in 2010 alone, according to court papers.

Federal prosecutors called the group "an international organized criminal enterprise allegedly responsible for massive worldwide online piracy."

FBI Shuts Down Megaupload File-Sharing Site With Online Piracy Indictments

title=Megaupload Claims 'Safe Harbor' Protections}

Ira P. Rothken, a lawyer for Megaupload, told the New York Times, "Megaupload believes the government is wrong on the facts, wrong on the law." Megaupload has long claimed it is legally protected by the "safe harbor" provision of the Digital Millennium Copyright Act.

In a strange twist on the debate about online digital media piracy, Megaupload boasted high-profile support from celebrities, musicians and others creating the content being pirated. Before the shutdown, Megaupload had endorsements from Alicia Keys, Kanye West and others.

Sites such as Megaupload, Rapidshare and Mediafire are promoted as easy ways to legitimately transfer large files from one computer to another or between two users. Media companies have long claimed the legitimate file sharing just concealed the fact that it was abetting widespread piracy.

Megaupload.com had 50 million visitors daily and accounted for 4 percent of all Internet traffic, according to the indictment. According to a recent report from Palo Alto Networks that analyzed 1,636 enterprises to determine what kinds of applications were running on their networks, Megaupload was found on 57 percent of the organizations in the study. While significantly fewer organizations ran Megaupload, as opposed to Dropbox, Megaupload consumed 20,405GB of bandwidth, compared with Dropbox's 17,573GB, the report found.

Federal investigators managed to obtain emails and other correspondence among the defendants to show they were aware Megaupload contained unauthorized content. In an email from February 2011, three of the defendants discussed an article on how to stop the government from seizing domain names, the indictment said.

The arrests and site shutdown came immediately after the widespread Internet strike on Jan. 18, when thousands of sites, including Wikipedia, went dark in protest against the Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA). Other sites, such as Google and Mozilla, highlighted their opposition to the bills by graphically altering their sites and encouraging users to sign petitions. On the Google site, there was a broad black band obscuring the Google logo signifying its belief that the proposed legislation would impose censorship on the Internet.

If passed, SOPA and PIPA would force Internet service providers, ad networks and search providers to block access to "offending" sites like Megaupload. If SOPA and PIPA had been law, the Megaupload shutdown would have proceeded without having to involve the FBI, since a court order was all that would be necessary.

Opponents fear that the proposed laws' broad provisions could result in legitimate sites being taken down while not affecting online piracy.

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