The FBI has published what appears to me to be damning evidence against Kim DOTCOM and his ‘Mega Conspiracy’ business. I’ve read all 191 pages of it and it raises some very important issues for business people – both ethical and technical.
Kim DOTCOM has used several names, established a high-profile file-sharing service and seems to have made millions through selling a premium service to access pirated content . . . that was until the operation’s wings were clipped and he relocated to New Zealand. They’ll extradite him for sure, probably in mid 2014.
Most damning are the emails from the key conspirators themselves – Kim, the owner and his key staff who according to the evidence all knew very well what they were doing was illegal. Kim makes it clear that he just wants the money.
Kim established a range of businesses that allowed people to upload files (generally pirated movies but also porn and personal files) then used third party listing sites to index and link to those files.
Their ‘takedown’ and ‘anti-piracy’ systems appear to have been deliberately designed to obfuscate, so that links to the files were removed on request, but the files themselves remained available with more links simply generated and listed elsewhere. Reading it reminded me of Day of The Triffords in some way in that copyright owners would succeed in taking one link offline, yet could end up with another ten as a result!
Their onsite Search Engine was designed to deliberately mislead, so that copyrighted material was deliberately excluded from the search results, but still available from other sources (which they appear to have cooperated with).
Large and popular files were selected for special treatment:
The preliminary analysis of the databases shows that the vast majority of files on these computers are infringing copies of copyrighted works, and the Mega Conspiracy have purposefully made their rapid and repeated distribution a primary focus of their infrastructure. These faster servers thus facilitated the mass distribution of popular copyright-infringing works, which is incompatible with the notion that Megaupload.com was merely a cyberlocker, or that users were primarily interested in sharing personal, non-infringing materials. The establishment of these faster servers demonstrates that the Mega Conspiracy monitored the contents of the Mega Sites, analyzed user demand, and responded so as to maximize their financial profit.
In total, the preliminary analysis of the 2,444 files, including content and file name, indicates that at least 90% of the files are infringing copies of non-pornographic copyrighted works; 7% are pornographic videos (many of which are copyrighted); and 3% are unknown due to encryption or because the file has been split into multiple parts.
The traffic volumes were huge:
A particular Google Analytics report shows that between November 19, 2010, and February 18, 2011, Megavideo.com had roughly 1 billion visits. Less than 13% of these visits were “direct traffic” — meaning visits that were likely generated by the user having directly typed the URL link into the web browser or having bookmarked the URL link. More than 85% of the visits to Megavideo.com were from “referring sites,” meaning the user appears to have clicked a URL link on the referring site that directed the user to Megavideo.com.
Their business model was to reward file uploaders, the best of them based in Vietnam and then to seek maximum profits from premium subscriptions. Repeat offenders (uploaders of pirated content) appear to have been readily accepted as a strong source of revenue. For Kim, the end (profit) justified the means (pirating).
Knowledge of piracy, structuring the business around piracy and playing with the the law seems to have been standard stuff for the team with dozens of conversations recorded in the evidence. For example:
“How clean are the existing videos … now, what do you think?” … “it’s pretty clean from the perspective of child porn / disgusting stuff,” “but still lot’s of copyright infringements.”… “if we want to clean things up we have to agree on what has to go and what not,” “otherwise I can delete 90% of the content :-)” … “right okay,”
So their business model relied on 90% pirated material. Not a good look from the outside.
Plentiful internal chatter amongst the team proves for me deliberate intent. Just one more of many examples:
“I just fear the day when those ten Spanish sites that make up for 20% of our payments get busted :(” … “nah sites will come and go all the time,” … “true :)”
Playing games with the law appears to have been fun:
“wow, an Indian subpoena requesting MV uploader credentials” … “wow,” “ah that one from the police,” “I think I saw that one.” … “it’s just Indian police,” … “yes, we can probably ignore this one.” … “we can always say that we never received their e-mail,” … “yep” “but they probably also sent a postal letter (scanned attachments).” … “ah yes then it’s a different story,” … “do we get many physical mail these days for copyright issues?” … “very few,” … “good.”
Crime certainly pays:
“our cost base is 1.7m (will go up to 1.8 million in April for May)…we have approx. 3.2M of prevmium revenue and 600K of ad revenue.” In other words … Mega’s profits during that time period were roughly $2 million per month.
And there appears to be mixed loyalty amongst the thieves:
“Ponzi scheme,” … “yes that’s Kim style indeed.” … “worked well so far,” “luckily,” … “Most Ponzi schemes pay much more frequently though :)” … “yeah but the likelyness that we’ll triple our profit again in 2010 is quite small,” “while at the same time the likeliness of us getting in trouble for some reason is getting bigger.” … “very true,” … “and the fact is when there’s no way out, Kim [DOTCOM] will also grab the last couple of millions and go on hiding mode again when that happens.” … “yes,” “or he’ll spend them and then ask ME to save him.” … “HAHA” “how ironic,” … “I already see that coming.”
Kim DOTCOM set himself up in business and generated anything but a win-win situation. It was a win-win-lose-lose, for he took on powerful people using deception and used all the tools that are easily accessed by the authorities. The FBI simply accessed all his accounts including Paypal, Skype, Google and his hosting servers.
Throughout the investigation, the FBI has obtained millions of pieces of electronic mail (“e-mail”) from accounts associated with the subject matter of this investigation, which span a time period from as early as approximately March 2006 through December 2011. The FBI has searched for and reviewed particular items and themes in these e-mails.
Going undercover was easy for the FBI, crumbs even I could have done this:
The FBI has conducted online undercover activities involving the Mega Sites. These undercover activities include identifying, viewing, and downloading copyright-infringing materials on these websites; opening “premium” accounts on these websites to analyze how these websites operate from a customer viewpoint; and performing network analysis to further analyze how these websites operate. In addition, the FBI has reviewed financial transactions to, from, and between the defendants and others; has examined computer servers belonging to the Mega Conspiracy; and has confirmed that certain files found on the servers are copyrighted works.
There is plenty to learn about from this Mega Fail but two things stand out for me:
- Life is not always simple. The rules – don’t lie and don’t steal – are actually pretty simple, but the implementation tends to cause most of us challenges. I know from my own sales career that there is a constant subtle pressure to perform, to tweak the truth every now and then to feather your own nest. I’ve found that it takes real effort to do the right thing. The deception for someone greedy is that the end justifies the means. Taking that path will end in death and destruction, in Kim’s case, probably jail.
- Nothing is confidential online. Kim’s and his cohorts’ private email and Skype communications are now visible to the entire world, courtesy of the FBI. This case may justify such exposure but many in the future may not. Assume that EVERYTHING online is and could be made public. Since 1993 when I commenced trading with second hand computers I have known how easy it is to lose privacy or digital data. Since 1999 when I set up an email forwarding services I’ve known how easy it has been for email to be intercepted, cloned, viewed and all without our knowledge. Since 2006 I have known first-hand that everything online has been ‘monitored’. Since the NSA revelations many others too have seen this. Assume that EVERYTHING – Skype, Email and even phone calls are fully recorded and will be available for ever.
For the brave or curious, the entire report is available here: http://www.scribd.com/doc/192754949/Mega-Evidence.
I would note lastly that this is just evidence from the FBI investigation not a judgement from a court. Kim no doubt has answers to some of this but in my experience pretty much all thieves I’ve known are liars. If the evidence stacks up, then Kim will be likely going down.