Megaupload Founder Kim Dotcom to Remain in Jail; Pink Cadillac, Art Seized

Megaupload.com’s founder was ordered by a New Zealand judge to remain in jail, three days after the U.S. shut down the file-sharing website and police arrested him in his mansion, seizing luxury cars, guns and art.

Kim Dotcom, the website’s German founder who legally changed his name from Schmitz, was remanded to Jan. 25, when the judge is scheduled to rule on his bail request, a court official said by telephone. Dotcom and three other men appeared in court in Albany, a suburb of Auckland, on U.S. charges.

Police used helicopters in the raid on the so-called Dotcom Mansion on Jan. 20, the eve of Dotcom’s 38th birthday, after the U.S. government charged seven men in an alleged $175 million copyright infringement conspiracy. Megaupload was advertised as having more than 1 billion visitors, more than 150 million users, 50 million daily visitors, and accounted for 4 percent of Internet traffic, prosecutors said.

“It was definitely not as simple as knocking at the front door,” Detective Inspector Grant Wormald said of the raid in a statement.

When police arrived at Dotcom’s leased Auckland home, he entered his house and activated electronic locks, New Zealand police said in the statement. They neutralized locks and cut their way into a safe room, where Dotcom was found with what looked like a sawed-off shotgun, according to the statement.

He denied any wrong doing at today’s hearing, according to stuff.co.nz website.

Flight Risk

Prosecutor Anne Toohey urged the judge to deny Dotcom’s request for bail, saying he was a flight risk, stuff.co.nz reported.

Police also charged a 55-year-old New Zealand man at the property with unlawful possession of a pistol. The man, whom police didn’t name, was released on bail and is scheduled to appear in court this week.

Police said they carried out 10 search warrants and seized 18 luxury vehicles, including a Rolls Royce Phantom Drophead Coupe and a 1959 pink Cadillac. The vehicles are valued at NZ$6 million ($4.8 million). Police said as much as NZ$11 million in cash was restrained in various accounts.

The four men were arrested Jan. 20 on U.S. charges of criminal copyright infringement and money laundering, according to a New Zealand police statement. Three others were being sought in connection with the case, the U.S. Department of Justice said in a Jan. 19 statement.

Web Backlash

The accused have run websites that unlawfully copy works including films, music and television programs for more than five years, the U.S. said. The arrests occurred as the U.S. Congress considers anti-piracy legislation supported by the movie and music industries that prompted a backlash from companies including Google Inc., the nonprofit Wikimedia Foundation Inc. and Web consumers.

The conspiracy was led by Dotcom, a resident of Hong Kong and New Zealand, and a dual citizen of Finland and Germany, who founded Megaupload Ltd., according to the indictment. Police also arrested a Dutch citizen who lives in New Zealand and two German nationals.

Opponents say the proposed U.S. anti-piracy laws -- Stop Online Piracy Act in the House and the Protect IP Act in the Senate -- would promote censorship, disrupt the Web’s architecture and harm their ability to innovate. Votes on the U.S. bills were postponed after legislators withdrew support following the online protests.

New Zealand opposition politicians want an inquiry into how Dotcom was able to stay permanently in Auckland, the stuff.co.nz website reported. He was able to settle there after investing NZ$10 million in government bonds in 2010, the website reported.

Renovations

Dotcom spent NZ$4 million renovating his home after moving in, the New Zealand Herald’s website reported, citing people it didn’t identify. A graffiti-style painting of Dotcom and his wife was displayed on the wall of one room, which had about seven 60-inch television screens, the website reported.

The U.S. indictment named assets that would be seized from the arrested men, including Mercedes-Benz cars with license plates saying ‘God’, ‘Stoned’ and ‘Guilty’. It also identified 108-inch LCD televisions and 60 computer servers.

Mega Conspiracy

Investigators executed more than 20 search warrants in the U.S. and eight other countries and seized about $50 million in assets, the U.S. Justice Department said in a Jan. 19 statement. Since September 2005, the conspiracy -- dubbed “Mega Conspiracy” by prosecutors -- generated more than $175 million in criminal proceeds by distributing millions of copies of copyrighted works, including movies, television programs, music, books, video games and software, according to the indictment.

The criminal charges follow a civil lawsuit filed by Megaupload against Universal Music Group Inc. in U.S. District Court in San Jose, California, on Dec. 12 in which the website claimed Universal Music improperly won the removal of a Megaupload promotional video from Google Inc.’s YouTube and other web sites.

Megaupload “privately produced, obtained all authorizations and releases from performing artists involved” and Universal Music abused the U.S. Digital Millenium Copyright Act by demanding the video’s removal, Megaupload said in its complaint.

The Megaupload video features endorsements from celebrities including Kanye West, Mary Jane Blige, Floyd Mayweather and Jamie Foxx, according to the complaint.

To contact the reporter on this story: Chris Bourke in Wellington at cbourke4@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.