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Updated: Day After Piracy Bill Collapses, Feds Shut Down Megaupload

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The FBI today unsealed an indictment that charges file-sharing site Megaupload and its executives with a list of criminal charges, including conspiracy to commit racketeering and money laundering.

The news comes a day after the proposed anti-piracy law called SOPA fell apart, and may be an effort by the White House to soothe frustrated Hollywood donors who have warned the bill’s failure could lead them to withhold election dollars. (This story is updated to describe retaliatory hacking attacks by Anonymous)

In a press release, the FBI announced federal prosecutors in Virginia are laying charges against Megaupload, its founder and a gallery of international conspirators located in New Zealand, Germany and other countries.

The government describes Megaupload as a massive criminal operation in which the main website acted as a conduit to other sites where pirated content — including books, movies and music — was easily available. The indictment says the alleged conspirators made money from selling premium membership and from ads on the site.

The FBI says the defendants made $175 million in illegal profits and cost copyright owners half a billion dollars. Although there is widespread piracy online, the source of the FBI’s figures is unclear as dollar amounts related to piracy are typically supplied by industry and can be unreliable.

In carrying out the arrests, the FBI worked with law enforcement agencies in at least eight other countries. The action also involved the seizure of servers in the US, Canada and Holland. The value of the seized servers and other others assets is allegedly worth $50 million.

The ringleader of the enterprise is a Hong Kong/New Zealand national with the unusual name of Kim Dotcom.

Megaupload has been a thorn in the side of the entertainment industry for years. Last month, it sued Universal for taking down a YouTube (NSDQ: GOOG) clip that showed celebrities like Kanye West appearing to endorse the site (it’s unclear if the endorsements were bona fide). The megaupload executives now face decades in jail for a variety of charges.

The FBI’s decision to announced the charges today, weeks after a grand jury indicted the defendants, may have political overtunes. The annoucement comes at a time when Hollywood is furious at Washington for backing away from proposed legislation called the Stop Online Privacy Act, and has threatened to withhold campaign donations. The law would have given content owners new powers to take down foreign websites.

Today’s enforcement action suggests that rights owners and the federal government already have extensive powers to target foreign websites. The prosecution is part of the Justice Department’s Task Force on Intellectual Property, a body that is coordinating enforcement efforts and has already removed zapped hundreds of websites for selling counterfeit products.

On Thursday afternoon, the Megaupload website was down.

Update: The online activist group Anonymous appears to have unleashed a series of retaliatory hacking attacks. Late on Thursday afternoon, the websites Justice Department’s and the Recording Industry of America appear to have been knocked off-line.

The Twitter account for Anonymous this afternoon published a series of menacing messages such as “Let’s just say, for #SOPA supporters their #SOPAblackout is today.”

4 Responses to “Updated: Day After Piracy Bill Collapses, Feds Shut Down Megaupload”

  1. >(it’s unclear if the endorsements were bona fide)
    I wasn’t aware there was any uncertainty that the endorsements were legitimate, do you have a source that calls them into doubt?  Everything I’ve read about the “mega song” or whatever it was called seemed to indicate that the artists definitely did endorse the site.

  2. Star Jonestown

    Cool.  Thanks Jeff!  

    I took exception, you answered, it’s a pretty d*mned good answer in my view, and hey, it’s your site.  

    Only issue I would wonder about is, how and when did the arrests take place…?  Meaning, it’s also quite possible or even likely that the arrests were only stalled by the international nature of it.  

    However, since you did me the courtesy to respond to a kind of snipe-y comment, I suppose it’s best not to dwell on further minor details.  There’s some hilarious excerpts about these Mega guys on GigaOm.  

  3. Star Jonestown

    Re “SOPA fell apart, and may be an effort by the White House”….  

    Sloppy.  The bill didn’t “fall apart”…  Support for it was damaged considerably, but it’s not like it dissolved in water or something.  

    And the White House didn’t put the FBI in a time machine and tell them, ‘go back a year and start an investigation in case we need to soothe Hollywood donors later’.

    FROM THE OFFICIAL FBI RELEASE:  “The individuals and two corporations—Megaupload Limited and Vestor Limited—were indicted by a grand jury in the Eastern District of Virginia on Jan. 5, 2012″ 

    It’s right there, for cripes’ sake. The indictment happened 2 weeks ago. Doesn’t anyone read this stuff? Doesn’t the actual truth bear weight, or is everything just a big, messy blog full of rumor, innuendo, gossip and half-thought causal relationships?

    • Jeff Roberts

      Star Jonestown, I’m not a partisan in the SOPA fights and was not trying to put thumb on the scale. I think the decision of senior Republicans like Rubio to withdraw their support is a sign the bill’s in big trouble. That doesn’t mean it won’t be back in another form — I just think the current version is history.

      As for the release you cite, yes, the indictment occurred weeks ago. That’s why I think the decision to unseal the indictment and announce it today was political.