What the Megaupload and its affiliates were accused of?

According to indictment Kim Dotcom, Megaupload ltd and other affiliates were members of the “Mega Conspiracy”, a worldwide criminal organization whose members engaged in criminal copyright infringement and money laundering on a massive scale with estimated harm to copyright holders well in excess of $500,000,000 and reported income in excess of $175,000,000.

Megaupload.com was a commercial website and service operated by the Mega Conspiracy that reproduced and distributed copies of popular copyrighted content over the Internet without authorization. Over the more than five years of its existence, the Mega Conspiracy has aggressively expanded its operations into a large number of related Internet businesses, which were connected directly to, or at least financially dependent upon, the criminal conduct associated with Megaupload.com.

Megaupload.com was at one point in its history estimated to be the 13th most frequently visited website on the entire Internet. The site claims to have had more than one billion visitors in its history, more than 180,000,000 registered users to date, an average of 50 million daily visits, and to account for approximately four percent of the total traffic on the Internet.

Megaupload.com’s income came primarily from two sources: premium subscriptions and online advertising. Premium users of the site, a small percentage of the overall user base, were able to download and upload files with few, if any, limitations. Subscription fees collected during the existence of the Mega Conspiracy from premium users are estimated to be more than $150 million. Online advertising on Megaupload.com and its associated websites, which was heavily dependent on the popularity of copyright infringing content to attract website visits, has further obtained more than $25 million for the Mega Conspiracy. Megaupload.com did not make any significant payments to the copyright owners.

The content available from Megaupload.com was not searchable on the website. There were third party “linking” sites, which contained user-generated postings of links created by Megaupload.com (as well as those created by other Mega Sites, including Megavideo.com and Megaporn.com). 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.

The high traffic volume on the Conspiracy websites allowed the Conspiracy to charge advertisers up-front and at a higher rate than would be achieved by the percentage-per-click methodology used by other popular Internet advertising companies.

Members of the Mega Conspiracy negotiated the use of an “Abuse Tool” with some major U.S. copyright holders to purportedly remove copyright-infringing material from Mega Conspiracy-controlled servers. The Abuse Tool allowed copyright holders to enter specific URL links to copyright infringing content of which they were aware, and they were told by the Conspiracy that the Mega Conspiracy’s systems would then remove, or disable access to, the material from computer servers the Conspiracy controls. The Mega Conspiracy’s Abuse Tool did not actually function as a DMCA compliance tool as the copyright owners were led to believe.

The Conspiracy’s internal reference database tracked the links that have been generated by the system, but duplicative links to infringing materials were neither disclosed to copyright holders, nor were they automatically deleted when a copyright holder either used the Abuse Tool or made a standard DMCA copyright infringement takedown request.

Mega Conspiracy has received many millions of requests (through the Abuse Tool and otherwise) to remove infringing copies of copyrighted works and yet the Conspiracy has, at best, only deleted the particular URL of which the copyright holder complained, and purposefully left the actual infringing copy of the copyrighted work on the Mega Conspiracy-controlled server and any other access links completely intact.

At all times relevant to this Indictment, the defendants and other members of the Mega Conspiracy knew that they did not have license, permission, authorization, or other authority from owners of hundreds of thousands of copyrighted works to reproduce and distribute those works, including making them available over the Internet. Members of the Mega Conspiracy were aware of the way that their sites were actually used by others; have themselves used the systems to upload, as well as reproduce and distribute, infringing copies of copyrighted content; and were aware that they have financially benefitted directly from the infringement of copyrighted works that they were in a position to control. In calendar year 2010 alone, Dotcom received more than $42 million from the Mega Conspiracy.

Beginning in at least September 2005 and continuing until at least the date of Indictment, in the Eastern District of Virginia and elsewhere, the defendants did knowingly, willfully, and intentionally combine, conspire, confederate, and agree together and with each other, and with other persons known and unknown to the Grand Jury, to violate 18 U.S.C. § 1962(c) (the “Racketeering Violation”), that is, to conduct and participate, directly and indirectly, in the conduct of the affairs of that Enterprise through a pattern of racketeering activity, as that term is defined in Title 18, United States Code.

Members of the Conspiracy generally did not terminate the user accounts of known copyright infringing users, when it had the right and ability under its Terms of Service to do so. The Conspiracy made no significant effort to identify users who were using the Mega Sites or services to infringe copyrights, to prevent the uploading of infringing copies of copyrighted materials, or to identify infringing copies of copyrighted works located on computer servers controlled by the Conspiracy.

The Conspiracy made it more difficult for copyright holders to identify repeat infringers by removing the identity of the infringing file’s uploader from public parts of the Mega Sites in or about November 2010. Members of the Conspiracy generally did not delete infringing copies of copyrighted works from computer servers that they controlled, even when they were aware of the infringing material or the removal was specifically requested by the copyright holder.

Members of the Conspiracy deliberately misrepresented to copyright holders that they had removed copyright infringing content from their servers, while, in fact, they only removed certain links to the content file, which could still be illegally downloaded through numerous redundant links. Redundant links were sometimes created by members of the Conspiracy. Members of the Conspiracy reproduced copyrighted works directly from third-party websites, including from YouTube.com, to make them available for reproduction and distribution on Megavideo.com.