Megaupload's Dotcom Wins Bail as Judge Sees No Flight Risk - BusinessWeek

February 22, 2012, 1:34 AM EST

By Joe Schneider

(Updates with comment from judge in second paragraph.)

Feb. 22 (Bloomberg) -- Megaupload.com founder Kim Dotcom, imprisoned in New Zealand since Jan. 20 at the request of the U.S., won release today as a judge ruled he isn't a flight risk and should be freed on bail.

"The factors relating to flight risk are not now of such concern that there remains just cause to continue to remand Mr. Dotcom in custody," North Shore District Court Judge N. R. Dawson said in a 13-page written ruling e-mailed by New Zealand's Justice Department.

Dotcom, 38, is sought in the U.S., where he was indicted in the biggest copyright infringement conspiracy in the country's history. He faces charges in what U.S. prosecutors dubbed a "Mega Conspiracy," accusing his file-sharing website of generating more than $175 million in criminal proceeds from the exchange of pirated film, music, book and software files.

In a revised indictment filed in a U.S. court in Alexandria, Virginia, on Feb. 17, Dotcom was charged with three new criminal copyright counts and five new wire-fraud counts. Those are in addition to one count of racketeering, one count of conspiring to commit money laundering and two counts of criminal copyright infringement charges that were unsealed by the U.S. on Jan. 19 following the arrests of four individuals, including Dotcom, in Auckland.

The racketeering and money-laundering charges carry maximum penalties of 20 years in prison.

The conspiracy deprived copyright owners of more than $500 million, the U.S. government said.

Denied Misconduct

Dotcom, who legally changed his family name from Schmitz, had sought to overturn North Shore District Court Judge David McNaughton's Feb. 16 denial of his bail request. His three co- defendants were granted bail.

Dotcom earlier "emphatically" denied any criminal misconduct, in a statement to the court, according to McNaughton's ruling.

Dawson said new factors affected his decision to grant bail, including submissions that Dotcom doesn't have the money to leave New Zealand, with his bank accounts having been seized by authorities in that country, as well as Hong Kong and the U.K.

Keeping Dotcom in jail until an extradition hearing, which probably won't happen until July, would be "onerous and effectively punitive," Dawson wrote.

1 Billion Visits

Megaupload advertised that it had more than 1 billion visits to the site, more than 150 million registered users and 50 million daily visitors, and accounted for 4 percent of Internet traffic, prosecutors said. The site was shut down by the U.S. Justice Department and now shows an FBI anti-piracy warning, saying the domain name has been seized pursuant to an order issued by a U.S. District Court.

"It is submitted that this is the largest prosecution to date for infringement of copyright in the United States," McNaughton said in his ruling. "The offending is described as unprecedented and most serious."

When police arrived at Dotcom's house on Jan. 20, he activated electronic locks and sought refuge in a safe room, New Zealand police said in a statement. Police neutralized locks and cut their way into the safe room, where Dotcom was sitting cross-legged on the floor near a safe that contained a loaded shotgun.

The U.S. has 45 days from the arrest date to file a formal extradition request.

New Zealand's Justice Department didn't immediately respond to a phone and e-mail messages asking whether a formal extradition request from the U.S. has been received.

The case is Kim Dotcom v. United States of America. DCNSD [25 January 2012]. District Court at North Shore (Albany).

--Editor: Mary Romano, Terje Langeland

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net.