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Kim Dotcom hits out after former MegaUpload colleagues plead guilty to running criminal enterprise

By | Published on Friday 24 June 2022


MegaUpload founder Kim Dotcom has been extra busy this week criticising his former colleagues and the second cloud storage company they created together, as well prosecutors and the courts in New Zealand. The flurry of critical tweets followed the news that Dotcom’s MegaUpload co-founders Mathias Ortmann and Bram van der Kolk had pleaded guilty to various charges in relation to their time running the defunct file-transfer platform.

Dotcom, Ortmann and van der Kolk have all spent the last ten years fighting extradition from New Zealand to the US ever since the American authorities shutdown MegaUpload, which was accused of facilitating and profiting from rampant copyright infringement. The US authorities wanted all three men – and a fourth New Zealand-based ex-MegaUpload exec, Finn Batato – to face various criminal charges in the States.

The extradition case against the former MegaUpload execs dragged on for years, with the four defendants arguing that the extradition treaty between the US and New Zealand didn’t cover things like copyright infringement.

But prosecutors basically argued that so rampant and deliberate was the copyright infringement on the MegaUpload platform that the company was conspiring to defraud the music and movie industries, and fraud allegations warrant extradition.

The New Zealand courts ultimately decided there were grounds for extradition, although actually extraditing Dotcom et al also requires the approval of the country’s justice minister, and that approval is still pending.

Then last month it was announced that Ortmann and van der Kolk had reached a deal with US prosecutors which meant they would no longer face extradition.

Instead they would be charged in New Zealand with crimes relating to their involvement in MegaUpload. Those charges include that Ortmann and van der Kolk participated in a criminal group and conspired to cause loss by deception. And earlier this week the two men pleaded guilty to those crimes.

According to Stuff, the two men said following their guilty plea: “There’s no point in dwelling on these proceedings any longer and [we are] putting it behind us and accepting our responsibility”.

Alluding to their post-MegaUpload projects like cloud storage company Mega, van der Kolk added: “We are very proud of what we’ve built, and we are very much looking forward to continue to build. We want to focus on productive things and do great things for society and learn from our mistakes”.

Outlining the case against the former MegaUpload chiefs, a ‘summary of facts’ prepared by the New Zealand Police and made available this week states that – in 2005 – Dotcom, Ortmann and van der Kolk agreed to develop an online service to compete with another file-transfer platform, Rapidshare, which, it says, “they knew made money from large-scale copyright infringement – they intended to emulate Rapidshare in this respect”.

Once MegaUpload was up and running, the document goes on, the objectives of the company included encouraging the uploading, and then hosting and distributing, of digital files which “overwhelmingly embodied copyright protected works”; disguising the volume of copyright infringing files on the platform and deliberately frustrating the efforts of copyright owners to stop the distribution of those files; and selling advertising and subscriptions to monetise the copyright infringement the company enabled.

The MegaUpload chiefs, the document says, “knew and accepted that copyright infringement was the primary source of MegaUpload’s traffic, the primary source of MegaUpload’s income, and the reason the business grew to the size it did”, and that that infringement caused “the rights of copyright owners to be breached on a mass scale”.

Of course, the MegaUpload team previously insisted – and in Dotcom’s case, he still insists – that MegaUpload was a legitimate file-transfer and video-sharing platform – no different to Dropbox and YouTube – and that while there was copyright infringing content stored on the platform, the company was protected by the copyright safe harbour. The argument goes that if MegaUpload was liable for copyright infringement, so should be Dropbox and YouTube.

But not so, the ‘summary of facts’ says. “The defendants intended that MegaUpload would present an appearance of legitimacy and compliance with copyright legislation while making money from deliberate and systematic infringements of copyright”.

“This involved”, it goes on, “grooming the appearance of the sites so that the group’s reliance on copyright infringing content was concealed (which Mr Ortmann termed the ‘innocent front end’), while the great bulk of the traffic would be by ‘private back end’ access, via URLs circulated on the internet (and, in particular, indexed on third party linking sites)”.

Not only that, but “rather than identifying and sanctioning individuals who repeatedly infringed copyrights by their use of the [MegaUpload] sites, or terminating the accounts of those individuals, the defendants created a scheme which incentivised users to upload popular files and videos. They knew that, overwhelmingly, the uploaded content they attracted in this manner comprised of infringing copies of copyright-protected works”.

The document also states that Dotcom “controlled all aspects of MegaUpload’s operations”, “closely monitored and directed the administration of the entire business” and “took most of MegaUpload’s income for himself”.

However, not only were Ortmann and van der Kolk aware that their business was built on rampant copyright infringement, they helped make it happen. The document adds: “The defendants’ technical knowledge was indispensable to the creation and growth of MegaUpload”.

“Mr Dotcom ultimately determined matters of policy and direction but lacked the practical expertise to carry his wishes to effect”, it goes on. “He relied on the defendants to set up and run the technical infrastructure of MegaUpload. The offending would not have been possible without their involvement”.

American prosecutors are obviously hoping that Ortmann and van der Kolk pleading guilty to charges in New Zealand strengthens their case in the US against Dotcom.

They aren’t the first former MegaUpload execs to plead guilty to charges relating to their involvement in running the file-transfer business. Europe-based Andrus Nomm did that in 2015 and spent a year in jail in the US as a result. However, Ortmann and van der Kolk were much more central to the operations of MegaUpload.

When they both announced last month that they’d reached a deal with prosecutors to avoid extradition, Dotcom said on Twitter: “I want to congratulate my former friends and partners to have found a case resolution. They can avoid the terrible US justice system. I’m happy for them. After ten years of US lawfare I understand why they have given up. I don’t blame them and I sincerely wish them all the best”.

However, this week Dotcom was somewhat less conciliatory to his former colleagues. Although in the main his tweeted criticisms of Ortmann and van der Kolk were less directly about their guilty pleas over MegaUpload and more about the operations of Mega, that second cloud storage business the three men launched, but which Dotcom relatively quickly stepped away from.

Dotcom tweeted a link to an Ars Technica article about a new report that disputes Mega’s long-standing claim that its end-to-end encryption is so good, even Mega itself can’t decrypt data that is stored on its platform.

Ars Technica’s article notes how the authors of this new report “say that the architecture Mega uses to encrypt files is riddled with fundamental cryptography flaws that make it trivial for anyone with control of the platform to perform a full key recovery attack on users once they have logged in a sufficient number of times”.

Alongside the Ars Technica article, Dotcom alluded to previous allegations he has made about a Chinese investor in Mega. “Mathias Ortmann and Bram van der Kolk have stolen Mega from me to benefit a convicted Chinese criminal who was able to make a plea deal in China after he took control of Mega”, he tweeted. “Why did the Chinese government make a deal with Bill Liu who sold fake cancer medication that killed hundreds?”

Then more directly referencing this week’s MegaUpload developments, he added: “Because Bram and Mathias created backdoors for the Chinese government so that all Mega files can be decrypted by them. Same shady guys who just made a deal with the US and NZ Govt to get out of the US extradition case by falsely accusing me. Delete your Mega account. It’s not safe”.

Then yesterday Dotcom returned to Twitter to talk about the aforementioned summary of facts. He wrote: “Another bizarre development in my case. The High Court released to my legal team a one-sided and unchallenged statement of facts by the prosecution with strict non-publication orders to preserve the rights of all parties and then allows the media to publish it in full”.

“Based on current High Court orders we don’t have the right to challenge the false allegations that are now in the public domain”, he added. “This is just one of many examples of double-standard and unfairness in my case. My lawyers are now asking the court to lift the non-publication order”.

He then concluded: “We would like to respond and we have a lot to say about what the law permits when it comes to copyright infringement. The allegations remain baseless window-dressing. My co-defendants who claimed to be innocent for ten plus years were offered a sweet exit deal for a false confession”.

Also yesterday, Dotcom posted a tweet about what he has heard regarding the sentences that will stem from Ortmann and van der Kolk’s guilty pleas.

In theory the two men could be facing ten years in jail in relation to the crimes to which they have pleaded guilty. However, Dotcom wrote: “It’s my understanding that my co-defendants expect to get two years of home detention in exchange for false confessions”.

It remains to be seen if that is indeed the deal Ortmann and van der Kolk have done on sentencing – and also how the case against Dotcom, as the one remaining MegaUpload defendant still facing extradition, now proceeds.

The fourth New Zealand-based former MegaUpload exec who was also fighting extradition, marketing man Finn Batato, was dropped from the criminal case last year when it emerged he had life-threatening cancer. He died earlier this month.