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Megaupload’s Dotcom in Custody as New Zealand Awaits Extradition Request

Kim Dotcom, the founder of Megaupload.com, has been detained in New Zealand on charges of copyright infringement conspiracy under a U.S. request for provisional arrest ahead of a formal extradition request.

The U.S. had sought the arrest of Dotcom, who was held after a Jan. 20 helicopter raid on his leased Auckland mansion, before an extradition request, Elizabeth Collins, a spokeswoman at New Zealand’s Ministry of Justice, said in an e-mail today. Requests for provisional arrests are made when there’s concern a suspect will flee, according to New Zealand’s extradition law.

Dotcom is sought in the U.S. where he was indicted on charges his file-sharing website was part of a $175 million copyright infringement conspiracy with pirated film and music files being exchanged. Copyright law is complex and extradition on copyright offenses hasn’t been tested in any international court yet, according to Rick Shera, a New Zealand lawyer who specializes in information technology.

“This is, as far as we all know, the first case in which this type of activity has really been brought to court in a way which both parties will have their arguments heard,” Shera, a partner at Lowndes Jordan in Auckland, said. “The dividing line between a site which is providing these sorts of services legitimately and one which is providing them illegally is a fine one, and no one quite knows where the line is.”

Dotcom, Megaupload’s German founder who legally changed his family name from Schmitz, was charged in the U.S. because some of the site’s servers were based in Virginia and Washington, according to U.S. Justice Department’s indictment.

Has 45 Days

“The next step in this particular case is for New Zealand to receive a formal request for extradition,” Collins said. “In accordance with the treaty on extradition between the United States and New Zealand, the United States has 45 days from the date of the arrest to provide this request.”

New Zealand prosecutors must show Dotcom is accused of an offense that would be punishable by at least 12 months in jail in both the U.S. and New Zealand, according to the 1999 Extradition Act. Dotcom remains in a New Zealand jail, awaiting a judge’s decision on his request to be released on bail.

North Shore District Judge David McNaughton said he would rule on the bail request by tomorrow.

When police arrived at Dotcom’s house, on the eve of his 38th birthday, he activated electronic locks and sought refuge in a safe room, New Zealand police said in a statement. Police neutralized locks and cut their way into the safe room, where Dotcom was found with what looked like a sawed-off shotgun, according to the statement.

Pink Cadillac

In the raid, police said they seized 18 luxury vehicles, including a Rolls Royce Phantom Drophead Coupe and a 1959 pink Cadillac. The vehicles are valued at NZ$6 million ($4.9 million). Police said as much as NZ$11 million in cash was restrained in various accounts.

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, U.S. prosecutors said.

The accused ran websites that unlawfully copied 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 has 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.

To contact the reporters on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net; Chris Bourke in Wellington at cbourke4@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

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