Why Megaupload's Kim Dotcom Might Walk Free

Racketeering warrant has yet to be served against Megaupload, meaning the charges might fail to meet New Zealand's extradition threshold.

Mathew J. Schwartz, Contributor

April 23, 2012

4 Min Read

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Will Megaupload founder Kim Dotcom, who's been arrested by New Zealand authorities on racketeering and copyright infringement charges at the request of U.S. authorities, go free?

Questions arose Friday in a U.S. district courtroom in Virginia over whether Dotcom's extradition to the United States might proceed, or the charges against him even stick. "I frankly don't know that we are ever going to have a trial in this matter," Judge Liam O'Grady said to Justice Department prosecutor Jay Prabhu at the hearing, reported The New Zealand Herald.

Prosecutors have accused seven Megaupload employees, including Dotcom, of earning $175 million in subscription and advertising revenue from their file-sharing site, thanks to a widespread campaign of copyright infringement. But while previous such cases have been civil matters, the Department of Justice in this case took the unusual route of also filing criminal racketeering charges, which in New Zealand carry a five-year maximum sentence. The move appears to have been pragmatic. "The U.S. government needs to get over the hurdle of a five-year jail sentence to meet the criteria for extradition. Copyright charges in [New Zealand] carry a maximum of four years," reported the Herald.

[ More copyright scuffling: ISPs Agree To Copyright Alerts: What It Means. ]

Judge O'Grady's comments, interestingly, came after the FBI requested that the 1,100 servers that still store Megaupload data be allowed to be deleted. The two hosting providers that own the servers had requested that they either be allowed to return the servers to duty--Megaupload has been unable to pay for their upkeep since the Department of Justice froze its assets--or sell them to one of several groups that are seeking to retain the data they store.

But the judge seized on prosecutors' disclosure that they have yet to serve Megaupload with a warrant, and said that until that happens, discussing data deletion would be premature.

Yet, the Department of Justice launched its high-profile takedown of Megaupload in early January. Why has there been a three-month delay in serving the related warrant? "My understanding as to why they haven't done that is because they can't. We don't believe Megaupload can be served in a criminal matter because it is not located within the jurisdiction of the United States," Megaupload lawyer Ira Rothken said, according to The New Zealand Herald.

Rothken surmised that FBI lawyers had determined that Megaupload, which is based in Hong Kong, couldn't legally be served with a criminal warrant--only a civil one. Prosecutor Jay Prabhu argued against that interpretation in court, saying that because Dotcom is a majority owner of the company, he could be served. If so, however, what accounts for the delay? Furthermore, unless prosecutors can get the criminal charge--with its five-year maximum sentence--to stick, then the extradition request for Dotcom and the other accused Megaupload employees would go bust.

Again, the revelation over New Zealand's extradition requirements appear to explain the Department of Justice's unusual handling of this case. Notably, in the wake of the takedown, Jeff Ifrah, an attorney who co-chairs the American Bar Association's criminal justice section and committee on white collar crime, had questioned the government's use of a racketeering charge, which is typically reserved for drug-related or gambling cases involving organized crime syndicates--meaning, the mob.

Ifrah noted that the charges against Megaupload were quite similar to those made by Viacom against Google's YouTube. "Certainly no one accused YouTube of having mob-like activities," he said of the civil suit.

In the wake of Friday's court session, meanwhile, Dotcom has lashed out at federal prosecutors for destroying his business. "The U.S. government has terminated Megaupload, Megavideo and 10 other subsidiaries, including a company called N1 Limited that was developing a clothing line," Dotcom told TorrentFreak. "They destroyed 220 jobs. Millions of legitimate Mega users have no access to their files."

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About the Author(s)

Mathew J. Schwartz


Mathew Schwartz served as the InformationWeek information security reporter from 2010 until mid-2014.

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