Feds remove Megaupload from the Web over piracy charges

On Thursday, an indictment issued on January 5 by a federal grand jury in Virginia against two corporations and seven people was unsealed. As a result, five people were arrested, each connected to filesharing site Megaupload, and charged with running an organized criminal enterprise. In addition, the DOJ says that they seized 18 domains in the process.

According to the U.S. Department of Justice, the indictment is part of the largest criminal copyright case in the nation’s history, directly targeting Megaupload for “the misuse of a public content storage and distribution site to commit and facilitate intellectual property crime.”

Seven people were named in the indictment, none of them a U.S. citizen, four of which were arrested in New Zealand on the DOJ’s request. Moreover, law enforcement executed search warrants across the U.S. and eight other countries, seizing $50 million in assets and 18 domains related to Megaupload itself.

The indictment charges all seven and the corporations (Megaupload Limited / Vestor Limited) with, “engaging in a racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering, and two substantive counts of criminal copyright infringement.”

“...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 estimated harm caused by the conspiracy’s criminal conduct to copyright holders is well in excess of $500 million. The conspirators allegedly earned more than $175 million in illegal profits through advertising revenue and selling premium memberships,” the DOJ said in a statement.

If convicted, the statement said, each of the seven partners in Megaupload will face a maximum penalty of 20 years for conspiracy to commit racketeering, five years for conspiracy to commit copyright infringement, 20 years for conspiracy to commit money laundering, and five years for each of the charges of criminal copyright infringement.

The case itself comes just after millions of people wrote to Congress, protesting the controversial SOPA/PIPA bills. Along with Wikipedia, several other sites (Imgur, Reddit, BoingBoing, and others) went dark yesterday to protest the bills and fight censorship.

The actions and charges against Megaupload are exactly what people are worried about. It shouldn’t be ignored that on the fringe of the SOPA/PIPA debate, the U.S. closed a filesharing site using the claim of copyright and had foreigners arrested.

To make matters worse, even if the SOPA/PIPA connotations are removed from the equation, the case could set a precedent of making any domain responsible for user generated content.  

Megaupload reported an estimated 150 million registered users, and 50 million daily visits. Before the domain was taken offline, Megaupload said that the claims of mass copyright infringement were “grotesquely overblown.”

“The fact is that the vast majority of Mega's Internet traffic is legitimate, and we are here to stay. If the content industry would like to take advantage of our popularity, we are happy to enter into a dialogue.”

Three days ago, the top 20 files on the site consisted of anti-Virus demo software, freeware, and movie trailers.

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