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.