Megaupload takedown makes headlines and waves as Mr Dotcom applies for bail

Filed Under: Data loss, Featured, Law & order

The FBI's takedown of file sharing site Megaupload continues to make both headlines and waves.

Megaupload's larger-than-life founder, who these days answers to the name Kim Dotcom, certainly likes to show off.

He and his crew ran a bunch of swanky, top-of-the-range cars with in-your-face number plates such as GOOD, EVIL, MAFIA, HACKER, STONED, GOD and GUILTY.

But whether Dotcom turns out to be GUILTY or GOOD, he's certainly in a lot of trouble right now. He was arrested at his sprawling mansion home in New Zealand last week. If the FBI gets its way, he'll be extradited to the USA to be charged with a whole raft of offences.

Mr Dotcom, apparently born Kim Schmitz, isn't just facing copyright offences, but is also charged with conspiracy to commit racketeering and money laundering.

The short version of FBI's beef with Megaupload, or the Mega Conspiracy as the FBI describes it, is that the organisation generated revenue primarily as a side-effect of encouraging and rewarding the large-scale uploading and downloading of stolen content such as movies, music and complete TV shows.

Megaupload fans would say, "So what?"

Google's search engine, they say, often links to infringing material, which lets it make money out of adverts surrounding dodgy online content.

Google's YouTube video site, say file-sharing enthusiasts, offers bucketloads of unlawfully ripped videos and audio tracks, and unashamedly makes money from links to legitimate sites served up whilst doubtful videos are playing.

And as for Kim Dotcom's eye-watering spending on fancy cars, didn't Google's founders do a deal with NASA to park their private Boeing 767 at Moffett Field?

Therefore, an inveterate sharer might argue, Megaupload and Google are just two sides of the same coin.

The FBI and the US courts disagree. The affidavit lodged against the so-called Mega Conspirators paints a different picture:

In contrast to legitimate Internet distributors of copyrighted content, does not make any significant payments to the copyright owners of the many thousands of works that are willfully reproduced and distributed on the Mega Sites each and every day.

Loosely put, the FBI's position seems to be that Megaupload operated quite deliberately under a thin veneer of legitimacy, and nothing more. The rest, it seems, was all about robbing rights-holders blind.

If the allegations are true - and the indictment certainly seems to present a whole bucketload of evidence likely to trouble Mr Dotcom in court - then it's hard to argue why the site should continue operating.

But the takedown has created a side-effect of another sort: legitimate users who no longer have access to their legitimate files stored in the cloud.

Today's Sydney Morning Herald, for example, quotes an outraged Western Australian (WA) academic, who claims that he's now lost material he'd uploaded to share with his students:

It's like confiscating everyone's mobile phone because terrorists used them. I don't think it's correct to penalise the technology because, based on that logic, shouldn't the internet be taken down, as this is how people infringe copyright?

Maybe. Or maybe not.

A company won't be forced to shut down just because it suffers fraud by a third party. But a company can be forced by its creditors into administration (Chapter 7 in the US) for financial irresponsibility of its own, such as trading whilst insolvent. And when that happens, the doors are usually closed pretty quickly to prevent a bad thing getting worse. Trading stops; the business closes; assets are sold off; creditors may, eventually, get some money out. Or not.

Sadly, it looks as though our lecturer from WA needs to think in those terms, and to learn two painful lessons:

* Read the terms and conditions of any cloud service before you trust the sole remaining copy of your data to it.

According to the US Department of Justice, quoted in Ars Technica, "Megaupload clearly warned users...[that] they assume the full risk of complete loss or unavailability of their data, and that Megaupload can terminate site operations without prior notice."

* Keep your own backup copy of important data anyway, even if your cloud provider promises they'll guard it for you until the end of the universe.

Bulk removable disk storage currently costs less than US$100 per terabyte. USB keys go for less than US$1 per gigabyte.

Are your students worth so little to you that you can't spend a dollar on backup?


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11 Responses to Megaupload takedown makes headlines and waves as Mr Dotcom applies for bail

  1. Mark · 1318 days ago

    I am sure that the FBI will throw every legal charge in the book at them that they can. It will be interesting to see which ones actually stick. I predict this case is going to be fascinating - a landmark battle and it will drastically change the Internet of the future.

    • Charles · 1316 days ago

      Exactly. They are throwing a plate full of spaghetti at the wall and seeing what can stick.

      If every single movie, TV Show, book, magazine, and song ever created were hosted on Megaupload, that was still less than 2% of the 8 BILLION files that the DoJ seized and are now looking at. At least on provacy lawyer in Spain is already looking into a lawsuit about the invasion of privacy for the millions of users that did nothing wrong.

  2. Mark · 1318 days ago

    It was always quite obvious to me that MegaUpload was operating on pretty shaky legal ground. There is no way I would have entrusted business or critical files into its care without keeping backups for myself.

    That said, I don't suppose it would have been obvious to everyone. It was a pretty slick-looking operation.

  3. artfrankmiami · 1317 days ago

    I think what the professor referred to was his students were unable to access materials now that Megaupload was closed, not that he lost everything. but it is unclear in the article you quote from.

  4. Matt · 1317 days ago

    I think that the "difference" between YouTube and MegaUpload is more about who's running them.

    Kim Dotcom a.k.a. Kim Schmitz has a dubious history of Ponzi scams, insider dealing and hacking. The man is a legend in his own mind.

  5. Sharpear · 1317 days ago

    This is SOPA and PIPA coming out. The site is nothing more than an upload location, which has a terms policy. They take the time to remove content that is copywritten, and when you contact the company they do investigate and remove it. The fact that these people then post up new links and locations to this has nothing to deal directly with the company. They are closing the site because they don't pay sufficient funds to copywriters? That is like saying you own a site that stores information and you must pay to all copywritten companies, because you never know when their information will be uploaded to your server. It is as simple as uploading a file under a different name and linking a forum to what it really is? If you copy write something I believe it is the companies responsibility to monitor this and not be taken out on a company that offers uploading services.

  6. Sam · 1317 days ago

    I'm very glad you make a point of emphasising the risks of committing ones data to the cloud. I have never liked this mode of operation. It's impossible for the client to properly audit a cloud system, its management or backup regime to establish how good or bad it is. I worry about a number of my friends who think it's the bees knees and commit their entire business to it, against my advice, in the name of convenience. Most people worry about non-availability of the internet but I now think that may be a minor risk compared with the risk of FBI action.

    Do, please, keep up the warnings about this type of service, regardless of the apparent standing of the company offering it. With the determination of the US authorities (no other country seems to be keen to work on this), the prospect of new law and the global reach of modern US law, I can see that every company offering such services is potentially at risk of action to the detriment of all their customers.

  7. I'm wondering about the wording of their disclaimer though: "Megaupload can terminate site operations without prior notice". Since I'm not a legal professional I have no clue how to interpret things, but I believe wording is very important when it comes to disclaimers and terms of service and similar documents. This says Megaupload can terminate, but in fact, Megaupload did not terminate the site, it was a third party that did. Does this make a difference when it comes to the terms of service?

  8. CaL · 1317 days ago

    I laugh when people try to defend a site (in this case Megaupload) by saying "you can't just close it down because it contains 'some' illegal material'. I don't know a single person who knew of Megaupload as anything other than 'that site you go to get stuff for free'. It might not have started that way, but that's what it came to represent.

    I like many people have used the site for various reasons, but I'm not gonna cry about it once it's gone. Yes, it will be annoying, but it was only a matter of time before the law, bad luck, or 'something' caught up with it.

  9. peter · 1317 days ago

    Reading the thoughtful comments of many, really the situation is that we have to get on with working out a better more generous and fruitful approach to copy-right-cum-remuneration settlements.

    Going straight to law, as a 'process' or using the idea of law as a means to make good thinking, is just no good.

    Forget LAW, completely, and start working on ideas that will at least make great experiments. Its the usual stuff; 'what do we want' and need bloody law - yet - That Comes LAST.

    We are in a position where it should be obvious that established notions are just blinding, and distracting all from the hard work.

    Get thinking, start over.

    In the mean time be generous, and avoid the primary obstructiveness well exampled by a great blustering team of Fed (where would the world be without 'The US Federal'? ) Salary men.

  10. Lasaboy · 1317 days ago

    The next thing is they will take down other sites because they decide that they infringe on someone elses copywrite or they will go outside the law themselves to do it, Elliott Ness did it so why would they not.
    I am so sick of all things US Government doing this sort of stuff, praise God I don't live in the US

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About the author

Paul Ducklin is a passionate security proselytiser. (That's like an evangelist, but more so!) He lives and breathes computer security, and would be happy for you to do so, too. Paul won the inaugural AusCERT Director's Award for Individual Excellence in Computer Security in 2009. Follow him on Twitter: @duckblog