Kim Schmitz, founder of Megaupload and otherwise known by his alias Kim Dotcom, was arrested by the Department of Justice Thursday, for content piracy and losses to copyright owners that amount to $500 million. Schmitz was found by police in his New Zealand mansion's safe room, with what looked like a sawed-off shotgun Detective Inspector Grant Wormald said.
''It was definitely not as simple as knocking at the front door.''
Megaupload was founded in 2005. The site was based on file-sharing content, including movies, television shows and e-books. Megaupload was one of the Internet's most popular Web sites with claims of over one billion users. At one point, it was ranked the No. 13 most-frequented site on the Internet, according to the indictment. The site claims to have approximately 50 million daily visitors.
Federal authorities claimed that Megaupload executives, including Schmitz who reportedly owned a 68 percent stake, made $175 million from user subscription fees and online ads. Authorities said the Web site robbed authors, movie producers, musicians and other copyright holders of more than $500 million, according to The Washington Post.
Life of Luxury
Who exactly is Kim Schmitz? Schmitz is a 37-year-old German national who holds Finnish citizenship and has homes in Hong Kong and New Zealand, according to the Global Post. According to the FBI's indictment, the former hacker made $42 million from Megaupload and its associated Web sites including Megavideo, Megalive and Megapix.
Schmitz was found in the safe room of his New Zealand mansion. He lives in New Zealand's most expensive home, according to The Sydney Morning Herald - a $23 million mansion in Coatesville, north of Auckland, formerly owned by the founders of the Chrisco Christmas hampers empire.
Police raided the home to carry out 10 search warrants. They seized a total of 18 luxury vehicles, including Rolls-Royce Phantom Drophead Coupe and a 1959 pink Cadillac. He also had a 2012 Maserati and numerous Mercedes Benz vehicles.
The license plates on the vehicles were interesting unto themselves. They read: GOD (Rolls-Royce Phantom Drop Head Coupe), MAFIA (Mercedes-Benz ML63 AMG), STONED (Mercedes-Benz E63 AMG), GOOD & EVIL (Mercedes-Benz ML63 AMG).
Police also froze up to $8 million in various New Zealand bank accounts Schmitz claimed. According to The Wall Street Journal, the U.S. is moving to seize a great deal of property, including $175 million, or as much of that as they can find, and the funds in dozens of bank accounts of Megaupload executives.
Not His First Breach with the Law
The Megaupload takedown was not Kim Schmitz's first breach with the law. His list of convictions date back years and include inside trading, credit-card fraud, hacking and embezzlement.
Schmitz was also the mastermind who cracked the systems of banks and governments, including Citibank and the Pentagon. He then fled to Thailand to avoid indictment in Germany, Deutsche Presse-Agentur reported. In 2002, Schmitz was deported from Thailand to Germany on charges of insider trading and fraud, according to The Sydney Morning Herald.
He was granted New Zealand residency despite his blemished past after he invested $NZ10 million in government bonds and made hefty donations to the Christchurch earthquake foundation.
In a television interview in 2010, Schmitz said his convictions had been wiped clean under a German ''clean slate'' law. ''Officially I am as clean as it gets,'' he said. ''I am not a bad person with a bad character.''
Four others were arrested in New Zealand on Thursday, in connection with Megaupload. A total of seven individuals had stakes in the company. Schmitz owned 68 percent and the six others made up the remaining 32 percent.
More than 20 similar raids were carried out in nine countries in connection with the Megaupload shutdown, reports The Global Post.
Other suspects arrested include Megaupload's co-founder Mathias Ortmann and chief marketing officer Finn Batato, both from Germany, and Dutch national Bram van der Kolk, in charge of programming, reported Radio New Zealand. Graphic designer Julius Bencko, head of business development Sven Echternach and software developer Andrus Nomm have each been charged, have not been arrested.
A lawyer representing Kim Schmitz and his associates, Ira Rothken, told Radio New Zealand that the charges were without merit.
Whether it's search engines or YouTube or any user-generated content site, they're littered with other people's copyrights.
The test for liability isn't whether or not a website actually hosts copyrighted content; the question's much deeper - and that is whether or not an internet service provider should be responsible for other folks uploading and downloading such copy.
Schmitz allowed television cameras to film his court appearance Friday saying, We have nothing to hide.