Cybercrime

Computer-related acts for personal or financial gain

• Copyright/trademark violations

Money laundering

Offences

• Concealment/disguise of nature/ source/location/… of proceeds of crime

Originating Offences

• Copyright Infringement

Participation in an organized criminal group

Offences

• Agreement to commit a serious crime (conspiracy)

Degree of Involvement

• Overt act in furtherance of agreement

Ortmann et al v the United States of America

UNODC No.:
NZLx006

Fact Summary

In 2005, Mr Dotcom developed a business under the name “Megaupload”. This business enabled users to upload files for storage in the cloud on one of the many servers leased by Megaupload. The user would be provided with a unique link to the file, known as a uniform resource locator. The user could then provide the link to others enabling them to access the file.
The business grew rapidly. By January 2012, Megaupload claimed to have over 60 million registered users. It was said to be the thirteenth most frequently visited site on the Internet attracting an average of 50 million visits daily and more than one billion visitors in total. At its peak, Megaupload was estimated to account for approximately four percent of all Internet traffic worldwide.
Megaupload and Megavideo were the two most frequently visited websites in the Mega group. Users could upload videos to Megaupload and obtain a link which would provide access to it. A user could repeatedly upload the same video and obtain multiple links. The user could then choose to share these links with others, including through third party websites, enabling them to access the video using Megavideo. Megaupload was not responsible for these linking sites. Only the user could determine whether to make a link available to others. However, the United States contends that Megaupload encouraged this file sharing practice by offering financial rewards and incentives to users who uploaded files that attracted high numbers of views or downloads.
Anyone gaining access to a file stored on Megaupload through a link would be limited to viewing approximately 72 minutes of content, which is less than the length of most motion pictures. The viewer was then prompted to subscribe to Megaupload as a “premium user” in order to continue watching. Premium users were also able to view Mega-hosted videos embedded on third party linking websites.
Subscriptions from premium users provided the main source of revenue to the Mega group, estimated by the United States to be approximately USD 150 million. The other principal source of revenue was from online advertising shown prior to the commencement of each video. The United States contends that total advertising revenue exceeded USD 25 million.
The companies in the Mega group were all registered in Hong Kong apart from one which was registered in New Zealand. In all, 220 staff members were employed in the operation, including 52 in New Zealand.
In March 2010, the Motion Picture Association of America made a complaint of criminal copyright infringement arising out of the operations of Megaupload, leading to a lengthy investigation by the Federal Bureau of Investigation.
On 5 January 2012, the Grand Jury returned an initial indictment against the appellants. The United States Court immediately issued arrest warrants and made restraining orders in respect of all of the appellants’ assets worldwide, including real and personal property in Hong Kong, New Zealand, Germany, the Netherlands and Australia. On 20 January 2012, the United States took control of the website domain name and database service of Megaupload and its associated websites, effectively terminating the entire operation. The websites were replaced with an anti-piracy warning issued by the United States Department of Justice in conjunction with the Federal Bureau of Investigation and the National Intellectual Property Rights Coordination Centre.
The United States of America claims that Mathias Ortmann, Bram van der Kolk, Kim Dotcom, Finn Batato (the appellants) and others were members of a worldwide criminal organisation that engaged in criminal copyright infringement and money laundering on a massive scale with estimated loss to copyright holders well in excess of USD 500 million. The United States terms this the “Mega Conspiracy”.
The United States seeks the extradition of the appellants to face trial on 13 counts set out in a superseding indictment that was filed in the United States District Court for the Eastern District of Virginia on 16 February 2012.
As discussed at length in the judgement (and part of which is found under legal reasoning) the judge agreed with the District Court Judge that the evidence summarised in the record of the case is sufficient to establish a prima facie case on all counts. He also agreed with his ultimate conclusion that the appellants are eligible for extradition on all counts for which their surrender is sought.

Cross Cutting

Liability

... for

• completed offence

... based on

• criminal intention

... as involves

• principal offender(s)

Application of the Convention

Details

• involved an organized criminal group (Article 2(a) CTOC)
• occurred across one (or more) international borders (transnationally)

Involved Countries

United States of America

New Zealand

Investigation

Involved Agencies

• Federal Bureau of Investigation (“FBI”)

Details

• Special investigative techniques
• Element of transnationality (Article 3 (1) and 3 (2) CTOC)

Confiscation & Seizure

Seized Property:
In March 2010, the Motion Picture Association of America made a complaint of criminal copyright infringement arising out of the operations of Megaupload, leading to a lengthy investigation by the Federal Bureau of Investigation.
On 5 January 2012, the Grand Jury returned an initial indictment against the appellants. The United States Court immediately issued arrest warrants and made restraining orders in respect of all of the appellants’ assets worldwide, including real and personal property in Hong Kong, New Zealand, Germany, the Netherlands and Australia. On 20 January 2012, the United States took control of the website domain name and database service of Megaupload and its associated websites, effectively terminating the entire operation. The websites were replaced with an anti-piracy warning issued by the United States Department of Justice in conjunction with the Federal Bureau of Investigation and the National Intellectual Property Rights Coordination Centre.
 

International Cooperation

Legal Basis

• Convention against Transnational Organized Crime
• National legislation

Measures

• Extradition
• Mutual legal assistance
Outline:

Relied on:

Extradition Act 1999

Treaty on extradition between New Zealand and the United States of America 1970

 

Procedural Information

Legal System:
Common Law
Latest Court Ruling:
High Court
Type of Proceeding:
Criminal
 
The extradition proceedings commenced in New Zealand on 18 January 2012 when the United States filed a without notice application in the District Court at North Shore and obtained provisional arrest warrants for the appellants under s 20 of the Extradition Act. The following day, search warrants were issued in respect of the properties of Messrs van der Kolk and Dotcom.
The extradition proceedings had been planned over many months and included liaison between the Federal Bureau of Investigation and the New Zealand Police under the Mutual Assistance in Criminal Matters Act 1992. During the planning period, the Government Communications Security Bureau unlawfully intercepted private communications of Messrs van der Kolk and Dotcom. Mr Dotcom’s Auckland residence was also subject to unlawful surveillance from 16 to 20 January 2012 using a video camera set up on an adjoining property and by a police officer who visited the property on 19 January 2012 wearing a hidden camera.
Early in the morning on 20 January 2012, Messrs Ortmann, Dotcom and Batato were arrested in the course of a military-style raid on Mr Dotcom’s Auckland residence where Mr Dotcom was living with his wife, three young children and various staff members. The operation involved a large number of personnel, including members of the Special Tactics Group (a counter-terrorism unit) who were armed with automatic weapons. Police officers were deployed from two helicopters and others arrived in cars and vans.
The appellants mounted a comprehensive and determined defence to extradition and this was met with an equally determined response from the United States. The appellants filed a number of interlocutory applications in the District Court leading to appeals and applications for judicial review in the High Court and further appeals to the Court of Appeal and the Supreme Court. By the time the eligibility hearing commenced, nine judgments had been delivered by this Court on issues arising out of the extradition proceedings, seven by the Court of Appeal and two by the Supreme Court. This does not take into account numerous judgments issued in related proceedings concerning the restraint and forfeiture of the appellants’ assets. As a result of these interlocutory processes, the eligibility hearing in the District Court had to be rescheduled nine times before it finally commenced on 21 September 2015. That hearing took three months.
In a judgment delivered on 23 December 2015 in the North Shore District Court, Judge Dawson found that the appellants were eligible for extradition pursuant to s 24 of the Extradition Act 1999 on all counts in the superseding indictment. The appellants appeal against this judgment claiming that the Judge made errors of law in virtually every aspect of his eligibility finding. The United States also appeals against several aspects of the judgment.
The appellants also appeal against the District Court’s decision to dismiss three applications which they brought seeking a permanent stay of the extradition proceedings for alleged abuse of process.
These are not general appeals. The appeals are brought pursuant to the former s 68 of the Extradition Act, prior to its amendment by s 413 of the Criminal Procedure Act 2011, and are restricted to questions of law.
 
Additionally, the appellants apply for judicial review of the eligibility determinations and the District Court’s decisions dismissing the stay applications. The appellants contend that each of these decisions was the product of procedural unfairness, breaches of natural justice, errors of law and unreasonableness. The appellants also argue that the decisions were tainted by bias and pre-determination.
 
 
Proceeding #1:
  • Stage:
    other
  • Is the decision appealable?:
    No
  • Official Case Reference:
    CIV-2013-404-2168
  • Court

    Court Title:

    High Court of New Zealand

     
    • Criminal
    Description:
    In the context of the case, a side matter emerged at the High Court of New Zealand , involving Kim Dotcom and his wife, and  Bram Van der Kolk and his wife and the New Zealand’s Government Communication Security  Bureau (GCSB).
    The matter concerned the legality of the surveillance evidence, used as evidence in the judgement of 2nd February 2017. The High Court found, in a judgement dated 7th of August 2017, that:
    (a)    The interception, collection, storage, and disclosure of and enabling of access to the fifth plaintiff’s communications and information, whether in its original form or in some derivative form, were unlawful and contrary to the Government Communications Security Bureau Act 2003;
    (b)    The interception, collection, storage, and disclosure of and enabling of access to the fifth plaintiff’s communications and information, whether in its original form or in some derivative form, amounted to an unreasonable search in contravention of s21 of the New Zealand Bill of Righst Act 1990.
    The error related to the intercepted communications concerns the error of misinterpreting the plaintiffs' residency status. In particular, the case illustrates "a serious misunderstanding within the GCSB of the meaning of "permanent resident"under the GCSB Act", which is further discussed in the judgement attached.
    In particular, the GCSB had "inadvertently failed to comply with the requirements of s 14 of the GCSB Act in relation to the interception of communications of New Zealand persons".
     

    Defendants / Respondents in the first instance

    anonymous:
    Mathias Ortmann
    Gender:
    Male
    Nationality:
    German
    Legal Reasoning:
    Extraditable offences
    The Court is not required to determine whether an offence is an extradition offence in the requesting State. Rather, the question is whether the offence is an extradition offence in relation to the requesting State. In this case, this requires consideration of whether the conduct described in the indictment is covered by the offending listed in the United States/New Zealand Treaty or deemed to have been listed in it by virtue of s 101B of the Act (s 101B of the Act has the effect of deeming various offences to be extradition offences under existing treaties with foreign countries that are party to UNTOC. This applies to the United States/New Zealand Treaty. The deemed offences include, by virtue of s 101B(1)(a), an offence against s 98A of the Crimes Act 1961 (participation in an organised criminal group) as well as any offences falling within s 101B(1)(c))
    While art II.16 of the treaty does not mention copyright infringement or conspiracy to commit copyright infringement in those terms, equally it does not specify any of the other myriad of ways in which offenders could conspire to defraud the public or any person. Whether or not the State delegates who negotiated the Treaty specifically had in mind that art II.16 could extend to include a conspiracy to defraud by breaching copyright is beside the point. They must be taken to have intended that all conduct coming within this description would be covered, irrespective of whether they specifically envisaged every conceivable fraudulent means or every class of person capable of being defrauded.
    Count 2 alleges a conspiracy, the object of which was to obtain “commercial advantage and private financial gain”. The superseding indictment alleges that each of the appellants obtained money from their participation in the conspiracy. This satisfies the first element of the offending described in art II.16 – obtaining money.
    Count 2 further alleges that the money was obtained pursuant to a conspiracy, agreement or understanding between the appellants and others to infringe copyright. This satisfies the other element of the offending described in art II.16 – the money was obtained by conspiracy to defraud any person by deceit or falsehood or other fraudulent means.
    Having concluded that the essential conduct charged in count 2 amounts to conspiracy to defraud in terms of art II.16 of the Treaty, it is therefore an extradition offence.
     
    UNTOC
    Defence submits that the “serious crime” referred to in s 101B (e)(ii) (serious crime, being conduct constituting an offence punishable by imprisonment of four years or more) must be construed as a reference to a crime punishable in the requesting State by a maximum penalty of four years or more. Taken together with the requirement in s 101B(1)(c)(i), he argues that this imports a double criminality requirement that the offence must be punishable by at least four years’ imprisonment in both the requesting State and the requested State.
    Lawyers for the US submit s 101B does not require double criminality to be proved. She argues that the four year imprisonment threshold referred to in UNTOC has been met by Parliament under s 101B(1)(c)(i). She contends that Parliament cannot have intended that this aspect would have to be addressed again under subsection (c)(ii). In other words, the “serious crime” requirement in UNTOC (offending punishable by at least four years’ imprisonment) is met by subsection (c)(i), and subsection (c)(ii) is intended to incorporate the other features of an “organised criminal group” as defined in UNTOC.
    The judge accepted Mr Illingworth’s submission that s 101B(1)(c)(ii) imports all elements of the definition of an “organised criminal group” as set out in article 2(a) of UNTOC. While the “offence against any enactment” referred to in s 101B(c)(i) refers to an offence against a New Zealand statute or under New Zealand regulations, s 101B(c)(ii) directs attention to the “offence for which extradition is requested”, meaning the offence alleged in the United States. That offence must allegedly involve an organised criminal group as defined in UNTOC. It must therefore be alleged that the group acted in concert with the aim of committing one or more serious crimes, being conduct constituting an offence punishable by at least four years’ imprisonment. In my view, this means an offence punishable by at least four years’ imprisonment in the United States.
    Defence used:
    Defence submits that it is necessary to examine the context in which the Treaty was negotiated in order to understand what was intended by the categories of offences listed in it. This context includes the legal meanings of terms and their general legal usage at that time. He argues that it is significant that the negotiators would not have been aware of any case decided prior to 1970 in the United States or in New Zealand in which a conspiracy to infringe copyright had been held to constitute a species of conspiracy to defraud.
    The two major international instruments dealing with copyright at the time the Treaty was negotiated were the Berne Convention for the Protection of Literary and Artistic Works and the Universal Copyright Convention. The United States and New Zealand were parties to the Universal Copyright Convention at the time the Treaty was negotiated. Neither of these instruments required State parties to implement criminal sanctions for breach of copyright or treated breach of copyright as a type of fraud. Mr Illingworth submits that this is important context in considering whether the State parties can have intended that conspiracy to commit copyright infringement would be covered by the concept of conspiracy to defraud in art II.16 of the Treaty.
    anonymous:
    Kim Dotcom
    Gender:
    Male
    Nationality:
    German / Finn
    Defence used:
    Defence also emphasises the importance of the legislative context in determining the object and purpose of art II and interpreting its meaning. The Extradition Act 1965 was in force at the time the Treaty was negotiated in 1970. The First Schedule to that Act listed the offences that New Zealand treaty negotiators were permitted to include as extradition offences under an extradition treaty. Almost all of these offences were under the Crimes Act. The only exceptions were for specified offences under the Bankruptcy Act 1908 and the Dangerous Drugs Act 1927. Mr Mansfield points out that copyright infringement, which was then an offence under s 28 of the Copyright Act 1962 and only punishable by up to three months’ imprisonment, was not on the list.
    Copyright infringement was similarly not regarded as a serious offence in the United States at the time the Treaty was negotiated. Wilful infringement of a protected copyright for profit was a misdemeanour punishable by up to one year in jail and/or a fine of between $100 and $1,000.
    anonymous:
    Bram van der Kolk
    Gender:
    Male
    Nationality:
    Netherlander
    anonymous:
    Finn Habib Batato
    Gender:
    Male
    Nationality:
    German

    Charges / Claims / Decisions

    anonymous:
    Mathias Ortmann
    Charge / Claim:
    Conspiracy to commit racketeering (count 1);
    conspiracy to commit copyright infringement (count 2);
    conspiracy to commit money laundering (count 3);
    criminal copyright infringement by distributing a copyright work being prepared for commercial distribution on a computer network and aiding and abetting of criminal copyright infringement (count 4);
    criminal copyright infringement by electronic means and aiding and abetting of criminal copyright infringement (counts 5 to 8);
    and fraud by wire and aiding and abetting fraud by wire (counts 9 to 13).
    anonymous:
    Kim Dotcom
    Charge / Claim:
    Conspiracy to commit racketeering (count 1);
    conspiracy to commit copyright infringement (count 2);
    conspiracy to commit money laundering (count 3);
    criminal copyright infringement by distributing a copyright work being prepared for commercial distribution on a computer network and aiding and abetting of criminal copyright infringement (count 4);
    criminal copyright infringement by electronic means and aiding and abetting of criminal copyright infringement (counts 5 to 8);
    and fraud by wire and aiding and abetting fraud by wire (counts 9 to 13).
    anonymous:
    Bram van der Kolk
    Charge / Claim:
    Conspiracy to commit racketeering (count 1);
    conspiracy to commit copyright infringement (count 2);
    conspiracy to commit money laundering (count 3);
    criminal copyright infringement by distributing a copyright work being prepared for commercial distribution on a computer network and aiding and abetting of criminal copyright infringement (count 4);
    criminal copyright infringement by electronic means and aiding and abetting of criminal copyright infringement (counts 5 to 8);
    and fraud by wire and aiding and abetting fraud by wire (counts 9 to 13).
    anonymous:
    Finn Habib Batato
    Charge / Claim:
    Conspiracy to commit racketeering (count 1);
    conspiracy to commit copyright infringement (count 2);
    conspiracy to commit money laundering (count 3);
    criminal copyright infringement by distributing a copyright work being prepared for commercial distribution on a computer network and aiding and abetting of criminal copyright infringement (count 4);
    criminal copyright infringement by electronic means and aiding and abetting of criminal copyright infringement (counts 5 to 8);
    and fraud by wire and aiding and abetting fraud by wire (counts 9 to 13).

    Court

    High Court of New Zealand Auckland Registry

    Sources / Citations

    CRI-2015-404-000429
    [2017] NZHC 189

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