Feds charge 7 in 'massive' case against Megaupload online piracy ring

Raked in $175M in ill-gotten gains, say authorities

A day after thousands of websites went on strike protesting controversial anti-piracy legislation in the U.S., federal authorities today announced they have busted a pirate ring that allegedly hauled in $175 million.

Seven individuals and two companies were charged with multiple counts of racketeering, copyright infringement, and money laundering, the U.S. Department of Justice (DOJ) said in a statement.

The two companies -- Megaupload Limited and Vestor Limited -- operated sites under the Megaupload name, including megaupload.com from servers located in the U.S., Canada and the Netherlands.

According to federal officials, the gang generated $175 million in revenue from advertising sales and premium memberships, and caused more than $500 million in damages to the legitimate copyright holders.

Among the pirated content the Megaupload sites distributed were movies, television programs, music, e-books and business and entertainment software.

"This action is among the largest criminal copyright cases ever brought by the United States," the DOJ said in a statement Thursday. Prosecutors also called the Megaupload group "an international organized criminal enterprise allegedly responsible for massive worldwide online piracy."

Of the seven men indicted by a Virginia grand jury earlier this month, four were arrested today in New Zealand by local authorities. The three others -- who live in Estonia, Germany and Slovakia -- remain at large.

Alongside today's arrests, the FBI also seized $50 million in Megaupload assets, and served 20 search warrants in the U.S. and elsewhere to grab the servers used by the websites.

A U.S. District Court also ordered the seizure of 18 domain names belonging to Megaupload.

According to the grand jury's indictment, Megaupload.com was seeing 50 million visitors daily and accounted for 4% of all Internet traffic.

The Alexa site ranking service currently lists the site as the seventy-second-largest in the world. Over the last three months, the site's visitors averaged 1.4% of all Internet users.

Today's arrests followed on the heels of a widespread "Internet strike" Wednesday, when thousands of sites, including Google and Wikipedia, went partially or completely dark in protest against the Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA).

Those bills -- drafted by the U.S. House of Representatives and the U.S. Senate, respectively -- are designed to make it easier for copyright holders to take down foreign websites that distribute pirated movies, music and software. Opponents, however, have argued that the legislation will give content owners too much power.

The seven men each face a maximum of 55 years in prison if convicted on all counts.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@computerworld.com.

See more articles by Gregg Keizer.

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