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Megaupload outed file-sharers to Feds months before Dotcom raid

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Megaupload assisted a US prosecution of a smaller file-sharing service in 2010, 18 months before it itself was the target of a high-profile copyright-infringement lawsuit.

The Kim Dotcom-fronted file-hosting website Megaupload turned over details of five of its users in response to a June 2010 warrant [PDF] against NinjaVideo. This latter website piggy-backed on Megaupload's Megavideo streaming service. Federal investigators treated Megaupload as an innocent conduit for the alleged distribution of 39 pirated movies via NinjaVideo.

Megaupload allowed the Feds to search its servers in Virginia, and agreed to keep quiet about the matter after handing over database records and other information on the NinjaVideo crew. Ira Rothken, a lawyer who represents Megaupload founder Kim Dotcom, told WiReD that Megaupload responded as "good corporate citizens".

“Megaupload complied with the warrant and cooperated with the government’s request,” Rothken said, adding that the incident may have been far from isolated.

Megaupload received “a number of such warrant and subpoena-type requests a year and still has an expectation that, as classic ‘online service providers’, it is immune from liability for the acts of users who are the target of such warrants and subpoenas,” Rothken said.

The criminal investigation into NinjaVideo eventually led to a 22-month jail sentence and $200,000 bill for NinjaVideo founder Hana Amal Beshara, a 31-year-old from New Jersey. Matthew David Howard Smith, 25, of Raleigh, North Carolina, was jailed for 14 months for his involvement with NinjaVideo.

If Megaupload.com's principals thought their cooperation with the Feds would buy them some favour then they were mistaken. Copyright-enforcement investigators started probing Megaupload months before serving the NinjaVideo warrant. The Megaupload.com case eventually came to a head in a high-profile armed raid against Dotcom, the seizure of Megaupload's domain names and the criminal prosecution of Dotcom and others.

Megaupload’s co-founder Mathias Ortmann told Dotcom days after the search warrant against NinjaVideo was served that "the 39 supplied MD5 hashes [of the infringing videos] identify mostly very popular files that have been uploaded by over 2,000 different users so far". This "urgent" email appeared in Megaupload's prosecution papers [PDF] and suggests that Megaupload's chiefs were aware that their website was allegedly used by others to share copyrighted material but did nothing about it.

Rothken said Megaupload.com was asked to retain copies of the movie files as potential evidence.

“If anything, such a cooperation request by the government bolstered Megaupload’s view that as a cloud storage intermediary it was operating lawfully even if some users may have been misbehaving,” Rothken said. By responding promptly to DMCA takedown requests, Megaupload.com was acting as a responsible service provider, he argued.

However the January 2012 warrant that led onto the seizure of Megaupload.com domain claims that the website ignored thousands of DMCA takedown notices, which order the removal of copyright-protected material, from Hollywood studios and software publishers.

Hacktivists, who rallied to Dotcom's cause with denial-of-service attacks against large copyright-holding businesses shortly after the Megaupload.com raid last January, quickly turned against him following the revelation that he aided a federal investigation.

"Why is ‪@KimDotCom‬ free while other file-sharing pioneers still rot in jail?" thundered Anonymous news conduit @YourAnonNews. "Megaupload actively collaborated with the investigation, [this] is unacceptable."

Despite ongoing legal woes related to the Megaupload case, Dotcom and his partners have rallied to launch a new file-locker service, unimaginatively called Mega, at the weekend. The launch of Mega.co.nz came a year to the day after the Megaupload's takedown by the FBI. ®

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