MegaUpload founder Kim ‘Dotcom’ Schmitz has finally been granted bail in New Zealand after a third attempt to get out of jail. As previously reported, Schmitz, one of four men arrested in New Zealand last month at the request of US authorities in relation to their involvement in the Mega empire, had previously been refused bail twice because of concerns he would flee the country for home nation Germany, where it would be much harder for America to extradite him.

But yesterday a New Zealand judge accepted the arguments put forward by Schmitz’s lawyer that, with all his client’s bank accounts frozen, the accused wouldn’t have the means to leave the country. Prosecutors had previously expressed concerns Schmitz still had access to other secret sources of cash, but Judge Nevin Dawson yesterday said there was no evidence that was the case.

He also noted that, while it might hard for the US to extradite Schmitz should he manage to get to Germany, he could still be prosecuted through the German courts, meaning a return to his home country wouldn’t necessarily ensure he was out of the reach of the law.

Dawson ruled: “Since [the original bail hearing], all known assets have been seized and are unavailable for Mr Dotcom’s use or disposal. [Meanwhile] no new assets or accounts of any significance have been revealed since his arrest. Mr Dotcom’s submission that he has not concealed any assets or bank accounts has largely been borne out”.

The terms of Schmitz’s bail have not been revealed, though other bailed former Mega execs have been banned from using the internet. Speaking outside the court, the Mega chief told reporters: “I am relieved to go home to see my family, my three little kids and my pregnant wife. And I hope you understand that that is all I want to say right now”.

As previously reported, the three other Mega executives arrested at the same time as Schmitz have already been bailed. All four, and three other men, one arrested in Europe and two still at large, are accused of copyright infringement, racketeering and money laundering in relation to the now defunct MegaUpload service, and other related websites.

Prosecutors in the US filed new papers with the courts on Friday in the ongoing MegaUpload case, adding some extra charges against the rogue file-transfer and video site’s founder Kim Schmitz, three new copyright and five new wire fraud charges to be precise. Assuming American authorities are able to extradite the Mega man from New Zealand, they are hoping to get him for every crime possible in relation to the Mega empire he ran for five years.

According to Digital Music News, the latest court filings also make a number of claims about the Mega operations. First that the Mega service had 66.6 million registered users rather than the 180 million Team Mega claimed, and that 90% of those with accounts only used them to download content, not upload, suggesting that the vast majority of Mega users were using the service to access unlicensed music and movie files, and not to store, distribute or share their own content.

Some of the remaining 10%, meanwhile, only uploaded, suggesting they might have been part of the network of users rumoured to be incentivised by the Mega company to upload unlicensed files up to both the Mega video and file-transfer platforms, ensuring a steady supply of content for the 90% who only used the service to access free entertainment. Prosecutors also claim that not only were Team Mega downloading official music videos and TV shows from YouTube and uploading them to MegaVideo to bolster their content catalogues, they also nabbed user generated content from the Google-owned video service, so to give the impression Mega users were using the site to post their own UGC too.

Mega’s lawyers are yet to respond to the latest allegations against the company’s management. Four key execs, of course, are awaiting an extradition hearing in New Zealand. One more Mega operative has been arrested in Europe, while two other wanted former execs are still evading the authorities.

All three of Kim Schmitz’s MegaUpload colleagues who were arrested with him last month for their involvement in the file-transfer and video sharing service have now been let out of jail on bail, though Schmitz himself remains incarcerated.

As previously reported, the New Zealand authorities arrested four men last month at the request of the US, who accuse seven men in total of copyright infringement, racketeering and money laundering in relation to their involvement with the Mega empire.

Two of the four execs arrested in New Zealand, Bram van der Kolk and Finn Batato, were officially granted bail more or less immediately after their arrests, though technicalities about where they would stay while on bail meant they were only actually let out of jail in the last week.

The fourth man, Mathias Ortmann, was bailed yesterday. Despite the prosecution expressing concerns about the four men being in close contact while on bail, Ortmann will stay with van der Kolk while awaiting an extradition hearing, while Batato will stay with Schmitz’s wife. All have been banned from accessing the internet while on bail.

As also previously reported, Mega founder Schmitz has been denied bail amid fears he would flee New Zealand to his home country of Germany, where it would be much harder for America to extradite him.

The head programmer of MegaUpload was finally let out of jail yesterday, having been arrested alongside three other Mega execs in New Zealand last month.

While Mega founder Kim Schmitz has now been denied bail twice amid fears he might flee back to Germany, where it would be much harder for the US to extradite him, two of his colleagues were granted bail almost straight away, though it turns out they weren’t actually released from jail immediately because of various administrative matters.

Programmer Bram van der Kolk was freed yesterday, and will now stay in an Auckland residence with his wife, subject to certain restrictions. In particular no one in his household must be connected to the internet, with concerns the accused might endeavour to put some of Mega’s services back online, possibly under a different name.

The programmer’s lawyer called the no-net term “unreasonable”, and said the suggestion that his client could single-handedly relaunch a Mega-style file-sharing website from his home while under the constant watch of the FBI was “frankly ridiculous”. But Judge Pippa Sinclair complied with the prosecution’s request in ordering Van der Kolk be kept offline.

The other Mega exec given bail shortly after his arrest last month, Finn Batato, is still in jail today, though should be freed any day now. He is planning on staying with Schmitz’s pregnant wife while on bail, but she was unable to attend court to sign various papers because she had a doctor’s appointment. Once the paperwork is done, though, he should be let out of prison.

The fourth arrested exec, Mathias Ortman, is still to have his bail hearing for some reason.

At the latest Mega court hearings prosecutors also revealed that only one other man had been arrested in Europe in relation to the Mega empire (earlier reports had said two), which means two of the seven people wanted in connection with Mega’s alleged crimes are still at large. One of those two men, prosecutors said, had returned to his home country Germany where he would likely now avoid extradition, which is, of course, what US authorities claim Schmitz would do if let out of jail.

While some reports have suggested that the recent shutdown of MegaUpload, and resulting limitation of file-sharing services on sites operated by some of it rivals, has had a zero impact on the level of file-sharing actually taking place on the net (though, interestingly, a report on the DeepField Networks blog notes that it has resulted in European networks taking more of the strain, Mega’s servers having been US-based), some in the content industries are hoping that the threat of criminal action against those who operate file-sharing platforms might persuade some market leaders to voluntary stop operating.

As previously reported, one BitTorrent search site, BTjunkie, did just that earlier this week, citing concerns over the arrests of the Mega management and the subsequent announcement that the Swedish Supreme Court would not hear the final appeal of the Pirate Bay founders, who now face the prospect of many months in jail. And while anger in the file-sharing community about recent closures may motivate some of those who provide file-sharing services to stay the distance, Torrentfreak reports that some others are seriously consider their positions.

The torrent news site quotes one unnamed admin of a file-sharing service as saying: “There had been talks of shutting our site down, even before BTjunkie did it. A couple guys on the staff decided not to be involved any more after the MegaUpload incident”. Said admin specifically admitted that the arrest of Mega founder Kim Schmitz – a German citizen arrested in New Zealand at the request of the US – had raised concerns, many file-sharing site operators having previously assumed that jurisdiction issues could aid them legally if targeted by rights owners. “It’s turning into a witch hunt and it is worrying”, he concludes.

However, Torrentfreak points out that others are adamant that their services will continue to operate unhindered by Mega-style swoops, with Gary Fung – the man behind isoHunt.com – among them.

Unlike many file-sharing services, which have always been at risk of legal attack from the content industries but have often avoided any direct action, Canadian Fung has hands-on experience of dealing with copyright litigation. Torrentfreak quotes him thus: “After six years of two civil lawsuits with MPAA [Motion Picture Association Of America] and CRIA [Canadian Record Industry Association], we are still here. None of these events is really new to us. From Lokitorrent to Suprnova, we’ve seen sites we index come and go. And as long as the free internet exists, sharing will endure. As will isoHunt”.

With the MegaUpload swoop and Pirate Bay ruling, it does feel like the content industry’s long running fight against file-sharing has gained some real momentum in the last few weeks, ironically despite the collapse of anti-piracy bills SOPA and PIPA in US Congress. Though what impact those events will really have long term remains to be seen.

Meanwhile, read Torrentfreak’s analysis here.

BitTorrent search engine BTjunkie has shut down voluntarily, seemingly in the wake of the MegaUpload takedown and arrests in America and last week’s Supreme Court ruling in Sweden over the criminal charges against the founders of The Pirate Bay. The fact people associated with both Mega and the Bay now face jail time (potential in the case of the former, actual – in theory at least – in the case of the TPB), seems to have made an impact with BTjunkie’s operators.

One of the largest BitTorrent indexes on the net, BTjunkie was never directly targeted with civil copyright litigation by rightsholders, though it was listed as a “rogue site” by both music and movie industry trade bodies in the US, and was among the websites the content industries asked Google to remove from its recommended search function.

And, as the attack on file-sharing services stepped up a gear in recent weeks, it seems the people behind BTjunkie feared they could soon be targeted. The site’s founder admitted to TorrentFreak yesterday that last week’s announcement that the Supreme Court in Sweden had refused to hear The Pirate Bay founders’ appeal, meaning their prison sentences and fines are now final, and the swoop on MegaUpload executives around the world were the main reasons for the voluntary shutdown.

A statement on the BTjunkie website reads: “This is the end of the line my friends. The decision does not come easy, but we’ve decided to voluntarily shut down. We’ve been fighting for years for your right to communicate, but it’s time to move on. It’s been an experience of a lifetime, we wish you all the best!”

Asked if there was any future for BitTorrent websites, the unnamed founder told TorrentFreak: “I really do hope so, the war is far from over for sure”.

Having failed to win bail last week, MegaUpload founder Kim ‘Dotcom’ Schmitz is now trying to regain control of some of his fortune, according to the Herald Sun newspaper in Australia.

As previously reported, Schmitz, one of four men arrested in New Zealand at the request of the US authorities last month in connection to their executive roles in the controversial Mega business empire, was refused bail for a second time on Friday. Prosecutors say Schmitz might try to return to his home country of Germany where it would be much harder for the US to extradite him.

According to the Herald Sun, this week the Mega chief’s lawyers will turn their attention to the mutli-million dollar fortune he amassed running the Mega companies. All of Schmitz’s assets were seized as part of the raid on his $30 million rented mansion in New Zealand, but papers filed with the Auckland High Court argue that the freezing orders went too far, and some of the Mega founder’s fortune should be returned while he awaits extradition.

Schmitz’s aids have also criticised the New Zealand authorities for the way they raided the Mega team’s rented home last month, with his former security chief describing the raid as a “home invasion by New Zealand police at the urging of the US government”. In particular they have criticised officers for failing to act quickly enough when Schmitz’s pregnant wife became ill during the raid, but the country’s police say they are happy with the tactics they employed to ensure the four Mega execs were taken into custody.

CMU’s Andy Malt and Chris Cooke review the week in music and the music business, including the Pirate Bay verdict, the fate of the legit files stored on MegaUpload, Paul McGuinness’s take on Google, and the Ting Tings and their crazy interviews. Get the CMU Weekly Podcast every Friday by signing up via iTunes or RSS. Get the CMU Weekly Podcast every Friday by signing up via iTunes or RSS.

The New Zealand courts have refused MegaUpload founder Kim Schmitz bail for the second time. The Mega chief was initially refused bail last week on the grounds he may flee if let out of jail, but he appealed earlier today, his lawyers arguing he had neither the inclination nor the means to leave the country. But the New Zealand courts remained cautious.

Schmitz was one of four Mega execs arrested in New Zealand at the request of the US authorities last month, charged with mass copyright infringement, money laundering and racketeering via the various Mega businesses. Some of the accused were bailed, but the prosecution said they feared Schmitz, possibly utilising criminal connections, might attempt to return to his home country of Germany, where it would be much harder for America to extradite him.

According to Reuters, in the appeal hearing Schmitz said that, with his assets seized and company shut down, he simply didn’t have the means to flee, while adding: “I will not run away. I want to fight these allegations on a level playing field. I have three little children. My wife is pregnant with twins. I just want to be with them”.

But the prosecution successfully persuaded the judge that the Mega chief was indeed a flight risk, speculating that he may have secret funds he could tap into, and noting his past record, and allegations he fled to Thailand to dodge insider trading charges in Germany. Schmitz will now stay in jail until at least 22 Feb while the US goes through the motions of extraditing him and the other accused former Mega executives.

Elsewhere in Mega news, Torrentfreak has reported that the authorities in Hong Kong are making much of the support they gave American investigators as they gathered evidence against the Mega enterprise. Seemingly Hong Kong is keen to show it is ready to be tough in tackling intellectual property infringement, and in stopping online operations of suspect legality which attempt to put themselves out of the reach of Western courts.

The Mega empire was officially based in Hong Kong, and Schmitz sang the praises of the Chinese special administrative region late last year, telling Torrentfreak: “Hong Kong, what an awesome place to do business – people there leave you alone and they are happy for your success”. As it happened, by that point the Hong Kong authorities had been involved in investigations into Schmitz’s business affairs for the best part of a year.

According to the FT, as well as boasting of their collaborative work with the US to “smash a transnational cyberlocker syndicate”, the Hong Kong authorities are planning on launching a new “electronic crime investigation” centre to aid any future similar investigations. Other digital locker services based in Hong Kong that have also been accused of enabling copyright infringement by Western content firms, and there are quite a few, might soon be looking for new bases.

MegaUpload boss Kim ‘Dotcom’ Schmitz will be back in court tomorrow in another bid to secure bail, according to the AFP. A legal rep for the larger than life Mega chief confirmed to the news agency that his client would appeal the decision made by a New Zealand judge last week to refuse Schmitz bail.

As previously reported, Schmitz was arrested with three of his business associates in New Zealand last month at the request of the American authorities, who accuse the Mega execs of mass copyright infringement, money laundering and racketeering. The US is now going through the motions to extradite the accused.

Some of Schmitz’s colleagues were bailed pending their extradition hearings, but the judge handling the case said there was a risk the overall Mega chief might try to flee the country, most likely in a bid to return to his home nation of Germany, where it would be much harder for the US to extradite him. All of which means Schmitz remains behind bars.

But his lawyers will have another go at securing bail tomorrow. They are likely to again claim that Schmitz could not flee because his passport has been seized and bank accounts frozen. Prosecutors have expressed concerns that the Mega man might have access to other secret funds, while the judge said he suspected the defendant had criminal connections who may be able to help him leave New Zealand.

Defence attorneys are also likely to point out tomorrow that Schmitz’s family remains in New Zealand, and that he is on medication for diabetes and hypertension, and that being incarcerated may exasperate those medical conditions.

It remains to be seen if any of that washes in court second time round.

One of the companies that hosted data for the shut down MegaUpload has announced it is supporting efforts by the Electronic Frontier Foundation to rescue the legitimate content stored on the Mega platform.

As previously reported, the entire Mega business was shut down by the US authorities last month over allegations the multi-million dollar enterprise was built on the back of mass copyright infringement, money laundering and racketeering. As part of the shut down, the Mega websites, which were mainly hosted by two Virginia-based server companies, were taken offline with no warning.

Although some, many and possibly most Mega customers used the firm’s platform to share and access unlicensed music, movies and TV shows, the MegaUpload file-transfer and digital locker service did have legitimate uses, to help people distribute and store their own content and files. Since MegaUpload was taken offline users have been unable to access those files, and there are fears the server companies whose hardware the data is stored on might delete the content, given the Mega company is no longer paying its bills and all its bank accounts having been frozen.

The US authorities which orchestrated the Mega shut down have so far washed their hands of any legitimate data that is currently inaccessible to its owners, and which could still be deleted, though the lawyer representing Team Mega said earlier this week that he had negotiated with the two hosting companies – Carpathia Hosting and Cogent Communications – that no files would be deleted for at least a fortnight.

Carpathia went further yesterday, and said it would hold onto the data for as long as possible, and would give the world seven days notice before anything happened to files stored on its servers. Explaining that, for undisclosed reasons (possibly technical, possibly legal), it couldn’t currently access Mega files stored on its servers, Carpathia urged any affected customers unable to access legitimate content to contact the Electronic Frontier Foundation which is investigating legal routes to ensure former Mega customers can get their data back. The two organisations have set up a website called megaretrieval.com containing information for affected people.

In a statement, the CMO of Carpathia Hosting, Brian Winter, told reporters: “Carpathia does not have access to any data for MegaUpload customers. [But] we support the EFF and their efforts to help those users that stored legitimate, non-infringing files with MegaUpload to retrieve their data”.

Meanwhile EFF attorney Julie Samuels added: “EFF is troubled that so many lawful users of MegaUpload.com had their property taken from them without warning and that the government has taken no steps to help them. We think it’s important that these users have their voices heard as this process moves forward”.

One would have thought there was a great opportunity here for the movie studios and music majors who pressured the US authorities to shut down the Mega business to score some positive PR points by backing efforts to enable legitimate MegaUpload users to retrieve their data. While it’s not clear what percentage of Mega users hosted legitimate content on the web firm’s platform – and it may be small -in standing by and quietly watching those users’ data be deleted the entertainment giants are opening themselves up to serious charges of hypocrisy – “hey Mr Congressman, pass new laws to protect our content, but as for your content Mr Voter, fuck you, who cares?”

And in the context of the successes enjoyed by the Wikipedia-led protest against new anti-piracy laws in the US last month, and with an albeit anonymous online group now proposing a month long boycott of the entertainment industries in March, the music majors and movie studios could do with some positive PR just now.

The lawyer currently speaking for MegaUpload has told reporters that the server companies which hosted the now defunct file-transfer service has said it will hold onto all the web firm’s data for at least another two weeks, ending fears said data could be deleted this Thursday.

As previously reported, MegaUpload was taken offline earlier this month when the US authorities raided server facilities in Virginia that hosted much of the web company’s online operations. The shutdown occurred as various execs linked to the company were arrested on charges of copyright infringement, money laundering and racketeering.

But, while the Mega companies are accused of making millions by providing downloads and streams of unlicensed music, movies and TV shows, the MegaUpload service did have a legitimate element, in that users could distribute and store their own content via the Mega platform. Many now wonder what will happen to the legit content that belongs to Mega’s former customers, said users being unable to access their Mega accounts since the service was taken offline.

All that data is stored on the servers of two US companies, Carpathia Hosting and Cogent Communications, neither of whom are being paid by Mega anymore, the rogue web firm having had all its bank accounts frozen. The American authorities seemed to shirk any responsibility for the legit data stored on the Mega platform last week, saying it was a matter for Carpathia and Cogent, while a court submission from the US Attorney’s Office for the Eastern District of Virginia said it was under the impression the server companies would begin deleting Mega data this Thursday.

But MegaUpload attorney Ira Rothken, himself keen to ensure the legit content on Mega’s servers is not deleted so it can be used as part of his client’s defence, told reporters yesterday the server firms had given him more time to negotiate with government officials in a bid to find a way to rescue the at risk data – presumably by freeing up some of Mega’s frozen funds to pay Carpathia and Cogent to somehow return legit data to customers.

Rothken told reporters yesterday: “The hosting companies have been gracious enough to provide additional time so we can work out some kind of arrangement with the government”.

As also previously reported, while US authorities seem disinterested in the at risk data, some former Mega users in Spain are planning to sue, claiming that by switching off the Mega servers with no notice America breached Spanish laws on “misappropriating personal data”.

The focus in the ongoing MegaUpload saga may this week turn to the possibly millions of legitimate files stored on the rogue web company’s servers, or, rather, the servers of the American companies it outsourced much of its storage to.

As much previously reported, the various Mega websites were taken offline earlier this month by the US authorities, who also arrested the firm’s top executives who are accused of mass copyright infringement, money laundering and racketeering. The shutdown followed an in depth investigation by the Feds prompted by anger in the music and especially movie industries that the Mega directors, and especially its founder Kim Schmitz, were making millions out of an operation that relied heavily on the distribution and streaming of unlicensed songs, films and TV shows.

However, as the Mega enterprise’s bosses are sure to stress if and when the criminal cases against them reach the American courts, the company’s file-transfer service did have legitimate uses too, allowing paying customers to move their own digital files across the net, and to have back-ups of their own content safely stored “in the cloud”, as it’s almost still fashionable to say.

When the Mega servers were shut down with immediate affect when the US authorities swooped the week before last, that meant the firm’s customers lost access to their own files as well as all the unlicensed music, movies and TV shows they may or may not have enjoyed accessing via the Mega platform. What will now happen to those files is unclear, though many fear they may all be deleted, as soon as this week.

The problem is that Mega didn’t store its customers’ files on its own hardware, but on servers it hired from two American companies called Carpathia Hosting Inc and Cogent Communications Group Inc. The US authorities didn’t actually seize the servers hosting Mega’s files, rather disconnected them from the net, and took copies of some content to use as evidence of the web outfit’s copyright infringement when the case comes to trial. Carpathia and Cogent are now left holding all that data.

In theory they could try returning legit data back to the customers who uploaded it, but that would be a time consuming endeavour, and just hosting all the data in the meantime is an expensive business when the Mega companies – with their bank accounts well and truly frozen – are now unable to pay the two server companies their hosting fees.

Although Carpathia and Cogent are yet to formally comment on their plans, according to US media a letter submitted to court by the US Attorney’s Office for the Eastern District of Virginia on Friday indicated the two firms might now just delete all the data sitting on the servers Mega rented, starting the big disk wipe as soon as Thursday. The US authorities who shut down the Mega enterprise have seemingly washed their hands of what to do with the legit data stored on those offline servers, saying it’s a matter for Carpathia and Cogent.

Meanwhile, MegaUpload attorney Ira Rothken has confirmed to reporters that his clients are not able to pay its server providers to keep hold of any data because all the company’s funds have been frozen, though he added that he was negotiating with prosecutors to try to find a way to stop any widespread deletion of files, partly for the benefit of Mega’s former customers, and partly because he hopes to use the legit content stored on those servers in his clients’ defence.

Despite heightened fears that the big delete would start on Thursday, Rothken concluded by saying he was optimistic the content could be saved, telling the Associated Press: “We’re cautiously optimistic at this point that because the United States, as well as MegaUpload, should have a common desire to protect consumers, that this type of agreement will get done”.

As previously reported, the Spanish branch of The Pirate Party had already raised the issue of the legit files stored on the Mega servers early last week, threatening to sue the US authorities for depriving the web firm’s customers from accessing their own content, on the basis doing so breached Spanish laws on “misappropriating personal data”. Whatever the legalities, if deletion goes ahead, you can expect other branches of The Pirate Party and related organisations to shout loudly about this.

It’s not known quite how much legitimate content was actually stored on the Mega platform, but if even only a relatively small number of legitimate files are now lost as collateral damage stemming from the Mega shutdown, it’s certainly going to provide new ammunition to those who oppose new anti-piracy laws – such as America’s SOPA and PIPA proposals – on the grounds that protecting the copyrights of the few will have a negative impact on the legitimate web use of the many.

And if it turns out that a large number of people do lose legit files if and when the Mega servers are wiped, that might also mean that the Mega shutdown poses other problems for other players in the cloud-storage market. As previously reported, since the Mega swoop other file-transfer and storage companies have either removed those elements of their respective services that most tangibly enable copyright infringement, or blocked access to American users, or crafted statements to stress how their business is very different to that of MegaUpload.

But if word gets around that the cloud-based storage space you’re renting, partly to ensure all your files are safely backed up for eternity, might just be switched off overnight, then the whole concept of cloud-storage – a big growth market at the moment – might become less attractive to mainstream customers.

CMU’s Andy Malt and Chris Cooke review the week in music and the music business, including the MegaUpload dramas, IFPI’s Digital Music Report, the Live Music Bill, HMV’s new supplier deals, Simon Cowell’s DJ search venture and Disney’s Joyful t-shirt. Get the CMU Weekly Podcast every Friday by signing up via iTunes or RSS. Get the CMU Weekly Podcast every Friday by signing up via iTunes or RSS.

While the Recording Industry Association Of America expressed optimism earlier this week that last week’s shut down of MegaUpload might lead to a surge in public interest in licenced digital music platforms, especially those in the rapidly expanding streaming music space, Torrentfreak says that the biggest beneficiaries of the Mega attack have been the firm’s direct competitors, ie other file-transfer services which offer access to large quantities of unlicensed content.

Filefactory, Depositfiles, Uploaded.to, Hotfile and Rapidshare – the latter of which has been regularly accused by European rights owners of enabling copyright infringement, more so than the Mega sites in fact – have all reportedly welcomed large numbers of new users this week, in some cases hundreds of thousands.

A portion of those will be people who used MegaUpload for the legitimate distribution of their own content, though the music and movie industries will no doubt suspect that a larger portion are on the look out for more free but illegal downloads of songs, films and TV shows.

As previously reported, many of those Mega competitors with key operations in the US have altered their services so to reduce the possibility of them enabling copyright infringement, presumably amidst fears they too could be targeted with criminal copyright actions.

Though many of those file-transfer sites based outside the US have simply blocked American IP addresses, in a bid to ensure they are operating beyond the jurisdiction of the American courts. Others are just watching the situation closely, but haven’t actually changed anything about the way they operate, and are instead enjoying all the new traffic the closure of the Mega sites has delivered them.

To be fair to the RIAA’s data man Joshua P Friedlander, he conceded that a portion of Mega’s customer base would seek out other free and illegal content sources but, citing the impact the closure of LimeWire had on legit digital music sales, he said he was also optimistic the dramatic swoop against MegaUpload and MegaVideo would benefit legit services too, especially those which offer a freemium option. Whether said services have seen anywhere near the spike Torrentfreak claims the other file-transfer platforms have enjoyed, though, remains to be seen.

Elsewhere in Mega news, some supporters of the now shuttered file-sharing company are accusing the big record companies of making MegaUpload and its boss Kim Schmitz enemy number one because the Mega firm was planning on launching a direct-to-fan platform for artists to be called Megabox.

The conspiracy theory goes that the big record companies especially feared Schmitz’s next business venture because it would enable artists to sell their own music and earn a 90% share of any sales. There were even plans to enable artists to earn from music giveaways, presumably via some sort of ad-funded platform. The labels knew this would empower artists and cut them out of the equation – the conspiracy theory goes – hence why they worked so hard to run the entire Mega company out of business.

Of course it is true that big content firms, once they have labelled an outfit as being an ‘uber-pirate’, generally aim to force that company out of business entirely, even if said company is concurrently developing legitimate content platforms alongside any service which enables piracy. Even though it’s not totally unprecedented for rights owners to sometimes forgive past piracy when licensing those digital start-ups that have somehow avoided the uber-pirate tag. But I don’t think America’s big content owners – who have been quietly fuming about the Mega business for sometime – needed the threat of Schmitz launching a legit direct-to-fan platform before putting active pressure on the authorities to act.

And, of course, that’s to assume a Mega D2F platform would be a huge threat to the labels. After all, numerous direct-to-fan platforms already exist, and some are gaining real traction amongst new artists and veteran acts out of record contracts, so Schmitz moving into this space wouldn’t really change anything. True, Mega could promote its D2F offering to its large existing user-base, but then that’s what Google Music is planning to do with its recently launched D2F system in the US, and that project is backed by most of the majors and big indie labels.

Record companies and movie studios just don’t like seeing individuals get rich on piracy-based businesses, and while it may be childish to let copyright enforcement get personal, when said individuals flaunt their piracy-enabled riches, that’s always going to rally label and studio chiefs to pursue whatever route is available to put that person out of business. Those individuals talking loudly about plans to launch label or artist friendly legit services may be part of that flaunting, but any threat those supposed plans pose is unlikely, in itself, to greatly impact on the fighting spirit in copyright land one way or the other.

There have been a few contenders for Beef Of The Week this week, but when it came down to it, nothing was quite as entertaining as the last seven days in the world of MegaUpload. I’m not 100% sure that an international operation, involving various law enforcement agencies, to arrest a group of men and shut down their company can strictly be referred to as a ‘beef’, but let’s go with it anyway.

So, anyway, as support for legislation in the US aiming to create new powers to block copyright infringing websites waned in Congress after a week of protest online, the US showed it could shut down such a website anyway. Although it should be noted that in this case MegaUpload had many of its servers based in America and its executives are accused of more serious crimes than just copyright infringement, both helping justify such a dramatic swoop.

The jewel in the crown was the arrest of MegaUpload founder Kim ‘Dotcom’ Schmitz, upon whom police swooped at his New Zealand mansion. Aside from the scale and suddenness of the action, it’s Schmitz who elevates this above your usual tedious copyright case. Whenever he’s spoken in the past, the German entrepreneur and convicted criminal has seemed larger than life, but as more details about his glamorous lifestyle, paid for by the millions of dollars he’s earned from the Mega empire, were revealed, it became apparent quite how much this is true. For one thing, he’s 6’7″ and weighs 21.5 stone. For another, he has a penchant for private jets, bubble baths and celebrities, not to mention the interesting array of number plates on his fleet of cars.

His size was the reason his lawyers argued he should be allowed out on bail pending his extradition to the US – he isn’t, they argued, the kind of guy who can sneak through customs – but the judge refused anyway, fearing Schmitz would use criminal connections to smuggle himself back to Germany, where extradition would be more difficult. Two of his associates were bailed though, with a third due to have a decision made today.

With all this going on, MegaUpload dropped a lawsuit against Universal over the previously reported YouTube takedown of the file-transfer company’s all-star promotional song and video, and it was revealed that Schmitz was also preparing for the release of his debut album, which is being worked on by LA-based production company Beets & Produce as we speak.

Perhaps most interesting of all, however, was the affect the swoop on MegaUpload had on other file-sharing websites, some of which limited their services in various ways following the arrests. Filesonic and Fileserver seemingly went furthest, blocking users from doing anything other than uploading and downloading content form their own accounts. How long this will last and what effect it will have long term is not yet clear – although the RIAA is confident that it will boost legit services, Torrentfreak reports that unlicensed sites which have not scaled back their operations are enjoying the boom in users.

Two associates of MegaUpload founder Kim Schmitz have been bailed by the New Zealand courts.

As previously reported, four men were arrested in New Zealand last week at the request of the US authorities in connection to their involvement in running the various Mega companies. Top man Schmitz was denied bail on Wednesday amidst fears he might use alleged criminal connections to flee the country if let out of prison, most likely to return to his home country of Germany where it would be much harder for the US to extradite him.

Schmitz’s three associates asked to have their bail applications heard separately, and earlier today two of them were let our of jail, the judge hearing the case saying the flee risk was minimal, and he was confident electronic tagging could mitigate that risk. Letting Bram van der Kolk and Finn Batato out of jail, judge David McNaughton said: “I am satisfied that the risk of flight here is minimal and such risk as remains can be met by the imposition of strict bail conditions including electronic monitoring”.

A decision on the fourth man, Mathias Ortman, was postponed until tomorrow, pending further submissions from his legal people. Lawyers speaking for Schmitz’s associates insisted that, unlike the Mega company’s larger than life founder, there was nothing to suggest they had hidden stashes of money or alternative identities they could employ.

The US is now working to extradite all four men back to the States where they are accused of copyright infringement, racketeering and money laundering. If found guilty, experts reckon they could each face up to 20 years in jail, though some have claimed online that technically their sentences could be anything up to 50 years. Quite how long the extradition process will take is unclear, though it could be a long drawn out process.

In related news, the Dutch police have confirmed that they also arrested a man in connection to the Mega enterprise last week. Prosecutors in New Zealand said earlier this week that two other Mega associates had been arrested in Europe. Dutch authorities confirmed they had taken an Estonian man into custody, with the US naming the accused as Andrus Nomm. The American authorities will now have to try and extradite him too.

But what about poor old Schmitz, still locked up in his New Zealand prison cell without his Mega mates for company? Well, he could always focus his mental energies onto his music. Because yes, while Schmitz may have relied on other people’s musical output to build his multi-million dollar Mega empire, word has it he has his own music ambitions, and has been working with LA-based production company Beets & Produce on an album. His partners on the project are reportedly continuing with the venture as we speak, meaning Schmitz’s musical offerings could be released even while he is in jail, which would be very hip hop.

Perhaps his old mate Swizz Beatz could have a word with Universal Music and see if it’d release the record. After all, the arrest and any future court battle makes for some great publicity for anyone with recordings to sell.

MegaUpload founder Kim Schmitz has been denied bail, and will now stay in custody in New Zealand until at least 22 Feb as the US authorities go through the motions of extraditing him.

As previously reported, after his arrest last week in New Zealand in relation to various allegations made against him by the US in regards to the Mega business empire, Schmitz’s lawyers applied for bail, claiming their client had so far complied with the authorities, that his passport had been seized and bank accounts frozen, and that his distinctive appearance (ie size) would make it hard for him to sneak past customs. But prosecutors said Schmitz had a history of evading criminal charges, adding that they feared he may have passports and bank accounts the US authorities have not yet seized, which could aid his escape from the criminal justice system.

The judge hearing the bail application, David McNaughton, initially told the court he needed more time to consider Schmitz’s case, which he said was particularly complicated. But yesterday the judge sided with the prosecution, saying that “with sufficient determination and financial resources, flight risk remains a real and significant possibility which I cannot discount and bail is declined”.

McNaughton added that the presence of unlicensed firearms at the property where Schmitz was staying suggested criminal connections, who could possibly aid an escape from the country, and that Schmitz would be highly motivated to attempt a return to his home country of Germany, because it would be much harder for America to extradite him from there – the Germans, as a general rule, will resist any efforts to force them to hand over one of their own citizens to a foreign criminal justice system.

Schmitz’s lawyer immediately announced his intent to appeal the decision. The Mega man’s legal reps also re-stated that their client is innocent of all the charges made against him by the US authorities – of commercial copyright infringement, racketeering and money laundering – while also claiming Schmitz was in ill health, suffering from diabetes, hypertension and a slipped disc.

The other three Mega associates arrested in New Zealand last week were also remanded in custody, with each requesting separate hearings to present arguments in favour of bail.

Since the arrests of various MegaUpload execs last week, the websites of some copyright owners, and their trade bodies, are still very wobbly following a wave of retaliatory hacktivist attacks. However, some other sites of dubious legality have also curtailed their operations – in one way or another – as a result of the American authorities swooping on the Mega management team. Those sites, including Filesonic, Fileserver, VideoBB, VideoZer, FileJungle, FilePost, UploadStation and Uploaded.to, also allow file-transfer services, and have also been accused by content companies of enabling mass copyright infringement, and of doing too little to stop the use of their platforms to share unlicensed content.

Filesonic and Fileserver have probably gone furthest, putting blocks in place that mean users can now only download content they themselves uploaded. This means that the platform can only be used to make back-ups of content, or to move digital files from one device to another, and users cannot make public links to their content available or access other peoples uploads. It’s not clear if this is a temporary or permanent change, but many of those who have paid subscription fees to the two companies for file-sharing services will not be pleased.

Presumably management at both Filesonic and Fileserver fear also being targeted with criminal action if they are seen to be profiting from copyright infringement – being sued by rights owners is one thing, but being arrested and facing jail time quite another (five years for copyright crimes, though other charges made against Team Mega could result in 20 year jail terms).

There are parallels with what happened after the landmark Supreme Court ruling against Grokster in 2005, which caused several other American P2P file-sharing providers (though notably not LimeWire) to go offline almost immediately, amidst fears the owners and financial backers of such technology could also be sued for millions. Though this time around, not only are the stakes higher – it’s criminal rather than civil action – the impact goes beyond the US, given Mega was a Hong Kong-based company, and its executives were outside the United States when arrested.

That said, jurisdiction is still an issue – the US courts and authorities were in a better position to act against Mega because it had a key server base within the States. Sites with no operations of any kind within the USA may feel they are safe from a Mega-style swoop, though some of the file-transfer sites tweaking their operations this weekend focused on blocking users from America, and ending alliances with partners and resellers there, to put further distance between their set ups and the jurisdiction of the American courts.

The shut down of the Mega sites completely, coupled with the impact of the Mega swoop on other file-transfer services, is likely to immediately boost legitimate online content services, or so says the Recording Industry Association Of America, which responded to the action against Schmitz et al in a blog post. Although you probably can’t see at the moment because the trade body’s website is down again amidst ongoing hacktivist action. But the Association’s data chief, Joshua P Friedlander, said that, while he knew a portion of Mega users would find other unlicensed sources of content, web trends following the closure of LimeWire in 2010 suggest some, maybe many, will be forced to try out legit digital content platforms, and they might like what they see.

Citing post-LimeWire digital stats, Friedlander writes: “So where did those [LimeWire] users go? There’s good data that shows many turned to legal services. In 2010, digital album sales grew 13% while digital tracks only grew 1% according to The Nielsen Company, and many suggested that rapid growth in download sales was finished. But in 2011 [after LimeWire's demise], digital sales rebounded, with digital album sales up 19% and digital tracks up 8% versus the prior year. [And] when Billboard looked at the data after the LimeWire shutdown it said ‘The spike in sales was immediate, notieable and lasting’. Collectively, this evidence strongly suggests that the shutdown of illegal sites helps create a thriving and diverse digital marketplace”.

Which is all lovely. Though, of course, the owners of file-transfer sites are not totally wrong when they insist that their services have legitimate uses, allowing users to store, distribute and share content they themselves own. And while it may be true that for some, maybe many, of these file-transfer platforms, the vast majority of users are accessing illegal content, what about those who do not?

There is a real demand for web platforms that allow users to share their own content with others, and while the Mega companies may have been dodgy in a number of ways, what about those file-transfer firms who have legit intents, but who may inadvertently enable some infringement? Of course that brings you back to the concerns stressed by opponents to the American web-blocking proposals in SOPA and PIPA last week – will basically legit services be lost in collateral damage?

Meanwhile some MegaUpload users are asking what happens to legit content they had uploaded to the Mega company servers, which are now offline? The Spanish branch of the Pirate Party has already announced its intent to pursue a civil action against the US authorities, who they believe have breached Spanish law by “misappropriating personal data” when they seized Mega’s servers. Supporting this action, the UK branch of the Pirate Party noted yesterday: “Much of the apparently infringing content held at MegaUpload is still available via other means, so closing the site has not had any serious impact on piracy. On the other hand, millions of archives stored entirely legitimately by private individuals and organisations are now offline – and this clearly causes significant personal and economic damage”.

Finally in Mega news for today, while hacking group Anonymous has been leading the hack-attacks against the US government and big copyright owners in the wake of the Mega arrests, it yesterday denied involvement in a project called Anonyupload.com, which reportedly plans to buy server space and to set up a service to replace MegaUpload. The venture is looking for donations to fund the purchase of server space in Russia, outside the jurisdiction of the US courts (though PayPal has shut down its account, so it’s not clear how donations can be made).

Despite seemingly being associated with the Anonymous movement by name, organisers of Anonyupload.com have admitted there is no official link, while some of those involved in Anonymous have warned the Mega-replacement project could be a scam mainly aiming to get cash off those who feel angry about the Mega-empire’s demise. However, Anonyupload.com subsequently denied it was a scam via Twitter, adding that any funds raised would be used to fund shared server space.

MegaUpload founder Kim Schmitz will remain in custody, for the time being at least, despite the controversial web entrepreneur’s lawyers insisting their client wouldn’t flee New Zealand, where he is being held while the US goes through the motions to extradite him back to the States, partly because his “distinctive appearance” – he’s 6’7″ and weighs 21.5 stone – would make it hard for him to sneak through customs.

Prosecutor Anne Toohey told the New Zealand court this morning that the FBI believes Schmitz, who usually goes by the ID Kim Dotcom these days, has bank accounts not yet seized by the authorities, and would therefore have the means to break bail if it was granted. She added Schmitz had multiple identities, and a record for fleeing criminal charges.

But Schmitz’s legal rep argued that her client had so far cooperated with the authorities, that his passport had been seized and bank accounts frozen, and besides “he is not the sort of person who will pass unnoticed through our customs and immigration lines and controls”.

Schmitz was arrested with three other MegaUpload executives in New Zealand on Friday, and faces allegations in the US of widescale copyright infringement, racketeering and money laundering. The US authorities presented a pile of internal emails between executives at the Mega companies to back up their claims, and then on Thursday swooped on the Mega firm’s Virginia server farm and took the organisation’s various websites offline. If all the criminal charges that have been made against the Mega team were proven in the US courts, the web executives could face up to 20 years in jail each.

The New Zealand judge hearing Schmitz’s bail application didn’t rule either way this morning, saying the bail application was too complicated to make an immediate decision, and that he would issue a written ruling on the matter on Wednesday. Schmitz’s lawyers insisted that their client’s business was legit at the bail hearing, while Toohey talked up the US authorities’ case against the accused, and also revealed two more men linked to the Mega operation had now been arrested in Europe.

While Schmitz tries to secure bail in New Zealand, his associates in the US are preparing to fight the criminal case against him and his Mega cohorts. As previously reported, court papers issued on Thursday say that Schmitz and his team deliberately built a multi-million dollar business on the back of a file-transfer and video-sharing site which relied on the distribution of unlicensed content, a portion of it uploaded by Mega employees. The authorities say the Mega companies took $110 million through PayPal alone, that Schmitz paid himself $42 million in 2010, and that $500 million worth of music and movie content was illegally transferred over the Mega servers.

The Mega team’s legal battle was dealt an immediate blow this weekend when a high profile American defence attorney took on their case, and then stepped back from it, within days. Lawyer Robert Bennett, whose famous past clients include Bill Clinton and Enron, was quickly hired to advise the Mega management when the US’s case against them was revealed on Thursday, but it was confirmed to Reuters last night that the attorney would not be able to represent Schmitz et al in their legal fight because a conflict of interest had emerged with another of the companies represented by his law firm, Hogan Lovells.

Elsewhere in Mega legal shenanigans, it was revealed this weekend that the web firm’s lawyers had requested its lawsuit against Universal Music over the all-star ‘Mega Song’ be dismissed, albeit without prejudice (which means the company could refile the litigation at some point in the future). As previously reported, the Mega company sued Universal after the music major had its promotional ‘Mega Song’ video temporarily removed from YouTube.

It was initially thought that Universal requested the song be taken down on copyright grounds under the US Digital Millennium Copyright Act, and as the major had no copyright claim in the song, that constituted a misuse of American copyright law. However, the music firm insisted it demanded the song be taken down under a separate contractual arrangement with YouTube. The video site’s owner Google subsequently denied it had any special arrangement with Universal enabling the music firm to remove content in which it had no copyright claim, and quickly reinstated the ‘Mega Song’.

However, the exact circumstances around the takedown were never ascertained, and Mega’s lawyers requested on Friday that, despite them dismissing their actual action against Universal, that their demands for Universal and YouTube paperwork relating to the removal of their song still stand. Or something like that, it was all a bit confusing really.

Talking of the ‘Mega Song’, it is – as previously reported – widely believed that producer and rapper Swizz Beatz was behind the promotional video, hence so many A-list artists agreed to take part, despite most of said artists being signed to major music companies then in the process of calling for MegaUpload and MegaVideo to be shut down. As also previously reported, it was claimed last week that Beatz was in fact CEO of the Mega companies, and it seemed Mega’s own website confirmed that fact, though his executive position in the web outfit was denied on Friday.

The producer’s exact relationship with Schmitz and the Mega businesses remains a mystery, though. It seems he was angling for a vanity title within the company, which might explain why Mega’s website was calling him CEO, even if he hadn’t officially been engaged as such. A legal rep of the Mega company told VentureBeat: “To my knowledge, Swizz Beatz was never involved in any meaningful way. He was negotiating to become the CEO, but it was never official”.

Although the producer himself hasn’t issued a statement since last week’s dramatic swoop on the Mega companies, a rep did confirm to the Wall Street Journal that his client had been discussing taking on an executive role with the Mega firm, but that he don’t know “whether the appointment actually went into effect”. Certainly Beatz, real name Kasseem Dean, isn’t being targeted by the US authorities, and sources close to the producer insist he was unaware of any illegal side to the Mega business. Others say talks for Dean to become Mega CEO were very recent, and the billing as such on the Mega website was premature, though others claim that billing had been on the web firm’s official site for some time.

So, all in all, plenty of intrigue remains in what is looking likely to be the most bizarre chapter yet in the file-sharing saga.