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Kim Dotcom – villain or freedom fighter?

Kim Dotcom – villain or freedom fighter?

23.4.2013 12:35

In 2009 a study by a research firm Arbor Networks and the University of Michigan found that a little-known collection of websites was responsible for an incredible proportion of internet traffic. Their hosting firm was using twice as much bandwidth as Facebook. The sites, called Megaupload, Megavideo and a few others, were registered in 2005 to one Kim Schmitz, a.k.a. Kim Tim Jim Vestor a.k.a Kim Dotcom, a German ex-hacker.

Growing up in Kiel, northern Germany, Kim Schmitz, a son of a Finnish-born mother and a violent alcoholic father, discovered gaming at the age of 11. He started hacking shortly thereafter. As a teenager, he routinely hacked the sites of organisations as Citibank, Nasa and the Pentagon. He hacked up fake calls to a pay-by-the-minute chatline, earning him DM 75,000 and a suspended sentence for computer fraud and data espionage in Germany when he was twenty. Eight years later he was arrested again, this time for insider trading and embezzlement, and got a 20-month suspended sentence. He left Germany and moved to Hong Kong and in 2010 to New Zealand. He first visited New Zealand a year earlier when he bought 12 luxury cars, valued at $3.2 million, leased a helicopter on a stand-by basis, and rented the most expensive private mansion in the country, some 60 km away from the largest city Auckland. He then applied for residency, which was duly granted in November 2010 by the New Zealand Immigration Department despite his foreign convictions and despite being persona non grata in Thailand. The immigration, blinded by reflection of dollar signs in their eyes, used a special dispensation to waive "good character" requirements.

In 2003 Dotcom set up a company called Data Protect Limited, which later changed name to Megaupload. Megaupload was a file hosting and sharing online service. At its peak in 2011, Megaupload accounted for 4 per cent of all internet traffic, was the 13th most popular internet site in the world by amount of traffic and had 150 million registered users and 50 million daily visitors. It offered an internet-based storage platform for customers, who ranged from large businesses to individuals. Millions of people used Megaupload mainly to store and access pirate copies of TV shows, feature films, songs, porn, and software. It had become an internet giant, though virtually unknown to most. Kim Dotcom (Schmitz changed his name several times) planned a public offering at an alleged valuation of more than $2 billion. The company generated $175 million in sales over its lifetime, mostly from premium accounts, and Dotcom personally earned $42 million in 2010.

Then, a day before his 38th birthday, the U.S. government took it all away. At 6.47am on 20 January 2012, a movie-style security forces operation began with the first two police helicopters landing on the lawn of the $24m Dotcom Mansion. More than 70 special armed police, including members of the New Zealand elite anti-terror Armed Offenders Squad, conducted the maneuver, supervised by the FBI over a video link, to apprehend the unarmed computer entrepreneur and his 3 associates, Finn Batato, Mathias Ortmann and Bram van der Kolk. Dotcom’s site domains, including Megaupload.com, are now the property of the U.S. government. His servers have been ripped out of data centers around the world and sit in evidence warehouses. Kim’s accounts have been frozen and he’s had to let go of 44 of his 52 house staff as well as Megaupload’s hundreds of employees. All but 2 of his 18 cars have been seized or sold. Kim Dotcom is fighting extradition to the US. He is being accused by the US Department of Justice of abetting massive online piracy, of copyright infringement, racketeering and money laundering. If convicted and extradited to the US, he faces up to 50 years in jail.

Dotcom is being portrayed as a modern-day villain by some and as a cartoon hero by others. The man actually acts like a caricature of himself most of the time. He is an incredible hulk of a man at 6ft 7in and about 150kg, married to a tiny Philippine ex-model, Mona, with whom he has 5 children. The internet is full of images of him with guns, fast cars and half-naked women. Property impounded by police during the raid included 15 Mercedes, several motorbikes, a Rolls-Royce Phantom Drophead Coupé and a 1959 Pink Cadillac. This makes it easy for the US authorities to target him. He acts like a Bond villain.

However, Dotcom’s lawyers insist a service provider cannot be prosecuted for third-party activities, pointing to YouTube as an example. The case is in the centre of a raging controversy and fight between online users and industry lobby groups (lead by Hollywood lobby group The Motion Picture Association of America) over where to draw the line between internet freedom and protection of intellectual property rights. YouTube, itself part of Google and shelted by Google’s own immense lobbying power, is protected by the US digital copyright act (DMCA), which means it cannot be held liable for copyright-infringing material so long as it doesn’t know it’s there and acts swiftly to remove it when informed. US legislators tried to clam on this practice with the Stop Online Piracy Act (Sopa) in 2011 but were forced to back down amid furious public outcry.
Dotcom says he was careful to abide by DMCA. But the movies deleted from Megaupload often reappeared within days, often many times. Having been indicted, he finds himself the latest personality in the centre of the internet freedom debate, along with the likes of Julian Assange, the founder of WikiLeaks, who is also facing extradition to the US and has been staying in protection at the Ecuadorian Embassy in London for nine months now. Dotcom’s sites were used for legal file storage and sharing, too. The fact that the authorities actually tore Megaupload offline meant a death sentence to the site without a verdict, which is a denial of the basic principle of presumption of innocence. That is somewhat troubling even to those who don’t like Kim Dotcom and/or his business.

Dotcom is fighting extradition furiously and has secured several victories in what now appears to have been a botched process and an embarrassment to the Kiwi authorities. Last June, a New Zealand High Court judge ruled that the warrants for the raid were illegal, and in December found that New Zealand’s CIA-equivalent had been unlawfully bugging Dotcom. It also became clear that New Zealand’s extradition treaty didn’t cover copyright infringement. The U.S. would hence have to prove in a Kiwi court that Megaupload staff had engaged in a mafia-style criminal conspiracy. In another legal victory in August the court ruled that Kim could have access to $4.8m of his frozen funds to pay for his considerable upkeep and for his defense lawyers in New Zealand.

What does Kim Dotcom do when he is not conferring with his attorneys? Well, he started a new enterprise, of course. Its name is Mega. Mega is a cloud storage site again. But unlike its predecessor, Mega allows subscribers to control who sees their files through the use of a sophisticated internet-based encryption system. This means Mega itself, the platform operator, has no access to the files. It can therefore claim it has no responsibility for distributing copyright protected content. Encryption not only provides privacy to Mega’s users but also a stronger defense against prosecution. How can Dotcom be liable for content even he cannot read?

At Mega’s launch party in January 2013, Dotcom spoke passionately about privacy. He said that in today’s world where all our private data is in hands of corporates like Facebook and Twitter who are completely unregulated and can sell them or hand them over to authorities without any recourse, humans had a basic need for “refuge”. There are certain things you just want to keep to yourself.

Mega has already gone wild and has over 3 million registered users. Registered in New Zealand, it is currently moving nearly half the entire bandwidth of the country and growing at 30% a week. The company is on track to bank millions from premium accounts in its first year. Mega offers users 50 gigabytes of storage for free, compared with 2 gigabytes from Dropbox and 5 from Google or Apple. There are three subscription packages.

Dotcom has hired a team of 28 global lawyers who he believes will take a proper stand against the U.S. government treating the Internet as a subjugated colony. “The US government expects every individual to be in the open. But when it comes to their own secrets, they arrest people and indict them, like Julian Assange,” he adds. “Since 9/11, the US has become a big danger for world peace. They can torture people, they can have secret prisons, they can spy on everybody.”

Browser-based storage is only the beginning for Mega. Mobile applications for Android and iOS are coming soon. By the end of this year Dotcom promises to launch an encrypted e-mail and text messaging. Later still, encrypted voice calls to compete with Google and Skype. And he’s also incubating plans for Megabox, a service for original music that lets the artist keep 90% of the revenue. “By the time this is all over,” Dotcom says, “I’ll have already built the next online empire.” It better be the case as he owes millions of dollars to his defense lawyers.

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