Why Did The Feds Target MegaUpload?

The US federal government, with help from police abroad, came down on MegaUpload with the online cop fury of an Old Testament God. But why MegaUpload? And why now?

There are plenty of players in the no-questions-asked online storage game: HulkShare, MediaFire, YouSendIt. They’re all staples of web sharing — and they’re all still up and running today. Partly because they’re smaller than MegaUpload, partly because they’re smarter, but mostly because they’re don’t operate like sloppy drug kingpins.

The US Justice Department’s whopping 72-page indictment against MegaUpload — or as it’s tellingly referred to in the document, the “Mega Conspiracy” — illuminates a cavalier operation of opulence, carelessness, and loads of money. The Mega Conspiracy crew — which spanned continents and was lead by flamboyant fatboy millionaire conman Kim Dotcom — was openly, wittingly rich off of copyrighted music. They were flagrant about their intentions to squeeze cash out of Simpsons episodes and 50 Cent albums, rewarding their most piracy-pushing users, laundering money through the site, and spending the cash in the most conspicuous ways imaginable.

And the feds have records of all of it.

Of all the brushes that painted a giant target on MegaUpload’s back, the most obvious one is size. MegaUpload ain’t no misnomer; the megasite consumed a staggering four per cent of all traffic on the internet with 50 million daily visitors. There were other places to throw the dart, but MegaUpload was a glowing bullseye the size of a dinner plate, they earned millions on their own through ad revenue, and allegedly cost copyright owners an estimated $US500 million (the MPAA reportedly provided highly inflated financial damage estimates to the DoJ in advance of the crackdown). The Mega Conspiracy was too good for its own good.

The sheer volume alone was enough to attract the attention of the Justice Department’s Intellectual Property Task Force; from there, it wasn’t hard for the feds to start getting very suspicious, very quickly. Because MegaUpload wasn’t just big; it was brazen. The site didn’t have blinking text that said SHARE YOUR PIRATED STUFF HERE, but the motive was clear. According to the indictment, the site wanted good pirated gems uploaded and spread far and wide. The document goes on to state that Mega knew it had infringing videos and songs on its servers and wanted it downloaded as much as possible for maximum ad money. So they bribed users to do it for them, says the indictment:

The Mega Conspiracy did provide financial incentives for premium users to post links on linking sites through the “Uploader Rewards” program, which ensured widespread distribution of MegaUpload.com links throughout the Internet and an inventory of popular content on the MegaConspiracy’s computer servers.

The rewards took the form of premium account upgrades, which allowed for faster downloads, or in some cases, straight cash.

The sprawling indictment goes on to describe cash that was spread around MegaUpload’s international presence, with million dollar transfers flying between Hong Kong, Virginia and Georgia, courtesy of a coding team that spanned US, Europe and New Zealand. Some of this money went back into beefing up MegaUpload, or was paid out to its super users. The Mega money bin also served as a handy way to launder money, the feds claim:

Members of the Enterprise and their associates committed money laundering, attempted to commit money laundering, and conspired to commit money laundering to facilitate and expand the Enterprise’s criminal operations.

Pretty cut and dry. And on top of all that, plenty of the dough was just pocketed: in 2010 alone, Kim Dotcom, the site’s Dr Robotnik-meets-Larry Flynt founder, hauled in $US42 million. His taste for women, expensive things and surfeit is well documented. Last autumn, while attempting to bribe New Zealand into residency and a $US30 million mansion, he bought a $US500,000 fireworks show for the city of Auckland. Just because he could. In the Feds’ eyes, he was a known crook who lived too large. And if you’re itching for a piracy conviction, why go after boring Jimmy HulkShare when you can hit the guy laundering money around the planet and buying his own fireworks shows?

Then again, Megaupload’s meteoric piracy blaze and Dotcom’s obese materialism had been rolling for years. Why yesterday? We asked the DoJ’s IP Task Force, and they haven’t responded (yet). But CNET’s Molly Wood has a conspiratorial-sounding theory that makes a hell of a lot of sense — and explains why that itch had grown so strong. It all comes down to SOPA:

My sources tell me the timing of the Megaupload arrests was no accident. The federal government, they say, was spoiling for a fight after the apparent defeat of SOPA/PIPA and not a little humiliation at the hands of the web. And what better way to bolster the cause for cyber-crackdown than by pointing to a massive display of cyber-terrorism at the hands of everyone’s favourite internet boogeyman: Anonymous?

They certainly got Anonymous’ attention.

The feds — those tasked as intellectual property sentinels in particular — want more power to kill sites like MegaUpload. It looks like they’re not going to get their way through legislation, so setting a prominent target ablaze in a very public and dramatic manner is a great screw you to SOPA’s foes.

If that’s the case, the Department of Justice should be gagging on irony: their swift destruction of MegaUpload sans SOPA proves how gratuitous the bill was in the first place. This week has been the week of copyright warfare, but the decision to nuke the king copyright violator so spectacularly only goes to show how little the feds need bigger bombs.