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The closing of Megaupload: SOPA again?

01/20/2012 -by:Silvina Moschini , CEO & Founder, Intuic | The Social Media Agency

Last Thursday, in the middle of the controversial debate about the anti-piracy law, the FBI announced the taking down of the web’s most popular download site. Pure coincidence?


After the famous “blackout” against Sopa, which saw protests against the proposed anti-piracy law on the front pages of the big websites, and the bill’s loss of support in Congress, the FBI announced the taking down of the web’s most popular download website.

Hand in hand with this, five of Megaupload’s executives have been arrested and accused of being part of a criminal organization responsible for worldwide online piracy.The arrests were made in New Zealand, and among the accused are the founder, Kim Dotcom (also known as Kim Schmitz), the site’s graphic designer, the head of business development, and the head of programming. New Zealand courts will have to decide whether or not to allow the extradition of the founder of the company to stand trial in the United States.


Hand in hand with the Law?

The authorities state that the decision has nothing to do with the bill, given that the investigation has been open for more than two years, and the police operation was approved two weeks ago. Among the various reports presented to validate the accusation is an email sent by Google Adsense to Kim Dotcom stating that the Megaupload site contained links to copyrighted content, and for that reason they could no longer continue to work together. This accusation led the company to create its own advertising agency. Also conversations between executives of the company have been released in which they refer to themselves as not being “modern-day pirates”, but pirate “shipping service” providers. The company is accused of grossing more than $175m in profits from this illegal activity, resulting in losses of more than $500 m for copyright holders.

Although the proof seems to validate the accusation, on the Megaupload site users can’t search for links to copyrighted content. This means that the links in which copyright law is infringed have been shared with third parties. For this reason the company created the so-called “abuse tool”, which permits the flagging of links that infringe the law, and there being blocked or removed by the system itself.


The reaction

The hackers group Anonymous has claimed responsibility for blocking and bringing down the websites of the US Department of Justice, and Universal Music, among others. This action has been named Operation Reprisal.

Conversely, the French government has congratulated the US authorities on the decision to close the download site.


Megaupload in figures

The company, founded in 2005 by Kim Dotcom (owner of 68% of the company) has more than a billion users, representing 4% of all Internet traffic. According to the accusations made by the US authorities, most of its income was received via PayPal, the service used to receive payment for Premium account services. In only five years subscribers paid more than $110m.

Also, bank transactions to the value of more than $40m in company accounts, including hotel bills and yacht rentals, have been discovered. Among documents presented by the FBI, it is revealed that the online-payment company Money Bookers (PayPal’s competitors) made transfers of more than $5m to Megaupload. Adbrite also paid them more than $840,000 for publicity. The income from associated sites comes to nearly $25m.