In one of the largest criminal copyright cases ever brought by the US, FBI has shut down a popular file sharing website – Megaupload.Com -- and charged seven individuals and two corporations for massive worldwide online piracy of copyrighted works.
The action, initiated by the FBI yesterday, on the site that is popular with Hollywood celebrities and has been endorsed by music stars such as Kanye West, prompted hackers to disable the FBI and Justice Department's websites.
Online piracy by the two companies - Megaupload Ltd and Vestor Ltd - generated more than USD 175 million in criminal proceeds and caused more than half a billion dollars in harm to copyright owners, the US Justice Department and FBI announced today.
This action is among the largest criminal copyright cases ever brought by the US and directly targets the misuse of a public content storage and distribution site to commit and facilitate intellectual property crime.
The individuals -- three of whom are citizens of Germany and one each from Slovakia, Estonia, and Dutch -- and two corporations were indicted by a grand jury in US District court, and 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 individuals each face a maximum penalty of 20 years in prison on the charge of conspiracy to commit racketeering, five years in prison on the charge of conspiracy to commit copyright infringement, 20 years in prison on the charge of conspiracy to commit money laundering and five years in prison on each of the substantive charges of criminal copyright infringement.
The indictment alleges that the "criminal enterprise" is led by Kim Dotcom, aka Kim Schmitz and Kim Tim Jim Vestor, 37, a resident of both Hong Kong and New Zealand.
Dotcom founded Megaupload Limited and is the director and sole shareholder of Vestor Limited, which has been used to hold his ownership interests in the Mega-affiliated sites.
According to the indictment, for more than five years the conspiracy has operated websites that unlawfully reproduce and distribute infringing copies of copyrighted works, including movies – often before their theatrical release – music, television programs, electronic books, and business and entertainment software on a massive scale.
The conspirators' content hosting site, Megaupload.Com, is advertised as having more than one billion visits to the site, more than 150 million registered users, 50 million daily visitors and accounting for four percent of the total traffic on the internet, the FBI said in a statement.
"The estimated harm caused by the conspiracy's criminal conduct to copyright holders is well in excess of USD 500 million.
"The conspirators allegedly earned more than USD 175 million in illegal profits through advertising revenue and selling premium memberships," it said.
The indictment states that the conspirators conducted their illegal operation using a business model expressly designed to promote uploading of the most popular copyrighted works for many millions of users to download.
It alleges that the site was structured to discourage the vast majority of its users from using Megaupload for long-term or personal storage by automatically deleting content that was not regularly downloaded.
The conspirators further allegedly offered a rewards program that would provide users with financial incentives to upload popular content and drive web traffic to the site, often through user-generated websites known as linking sites.
The conspirators allegedly paid users whom they specifically knew uploaded infringing content and publicized their links to users throughout the world, the Department of Justice said.
Meanwhile, yesterday, attempts to access the FBI, Justice Department, Universal Music, and Recording Industry Association of America portals failed, following retaliatory action by the "Anonymous" hacktivist group.
"Anonymous" announced that they had downed the sites.
"The Internet is here. Are you ready for The Year of Cyber War? We are. Rise up and join us to fight for your rights," YourAnonNews, an Anonymous-aligned group, said in a tweet.
US Shuts Megaupload, Charges 7 for Copyright Crimes
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