Kim Dotcom, real name Kim Schmitz (b. 1974) is a German-Finnish businessman who rose to prominence during the dot-com bubble and was convicted of insider trading and embezzlement in its aftermath. He is the founder of Megaupload and its associated websites. He legally changed his surname to Dotcom in 2005. in 2012, the New Zealand Police placed him in custody in response to US charges of criminal copyright infringement in relation to his Megaupload Web site.
Dotcom has spoken out against his negative portrayal in the media, claiming to be a reformed character and a legitimate businessman who has been unfairly demonized by United States authorities and industry trade groups such as the RIAA and MPAA. He contends that the services offered by his Megaupload site were not significantly different from those of comparable services such as Rapidshare or YouTube, and he has just been used as a scapegoat because of his hacker past.
As a teenager, Dotcom became known in his native Germany for claims to have cracked corporate telephone systems in the United States, and tried to parlay it into a career in data security. That effort led to his arrest on charges of using and selling stolen calling card numbers. In 1994, Dotcom founded a computer security company called DataProtect. In 1998, Dotcom was convicted of computer fraud and handling stolen goods, and sentenced to two years of prison on probation. According to a report by News & Record, he had traded stolen calling card numbers he bought from hackers in the United States.
He achieved early notoriety by being the subject of an advanced-for-its-time flash animation video called ‘Kimble Special Agent.’ The name is a reference to Richard Kimble, the main character of the television series ‘The Fugitive.’ In 1999, DataProtect and IVM engineering presented the ‘Megacar,’ a Brabus-tuned Mercedes-Benz which, among other features, had a Windows NT server, a 17.3″ SGI flat panel display, and combined 16 GSM modules to provide mobile broadband Internet access. Dotcom later sold 80% of the shares of DataProtect to TÜV Rheinland in 2000, during the dot-com bubble. The former went bankrupt at the time of the subsequent market crash in 2001.
In 2001, Dotcom purchased €375,000 worth of shares of the nearly bankrupt company LetsBuyIt.com and subsequently announced his intention to invest €50 million in the company. Unknown to others, Dotcom did not have the funds available to invest, although the announcement caused the share value of LetsBuyIt.com to jump by nearly 300%. Dotcom sold his shares a few days later for €1,568,000. Dotcom had also arranged and obtained an unsecured loan of €280,000 from Monkey AG, a company for which Dotcom had served as Chairman of the Board. The funds were to be paid to Kimvestor AG.
As a result, both Monkey and Kimvestor went bankrupt. Dotcom expressed remorse, stating that he had been ‘dazzled’ and had not recognized that he would be unable to repay the loans. In 2002, Dotcom was arrested in Bangkok, deported to Germany, and subsequently sentenced to a probationary sentence of one year and eight months, and a €100,000 fine, the largest insider-trading case in Germany at the time. Dotcom also pleaded guilty to embezzlement in 2003 and received a two-year probation sentence.
In 2005, Dotcom founded Megaupload Limited, a Hong Kong-based file hosting and sharing business that eventually became the 13th most popular site on the internet with over 150 employees, US$175 million revenues, 50 million visitors daily, and estimated to be responsible at its peak for 4% of all internet traffic. The Megaupload business’ domain names were seized and the sites shut down by the U.S. Justice Department in early 2012, following their indictment and arrests of the owners for allegedly operating as an organization dedicated to copyright infringement.
In December 2011, Dotcom’s Megaworld (owner of Megaupload, Megavideo, Megalive and more) released its ‘Megaupload Song’ promotional music video, which featured Kanye West, will.i.am, Jamie Foxx, Sean ‘Diddy’ Combs, Alicia Keys, Chris Brown and more lauding the service. Universal Music Group (UMG) responded by using the DMCA takedown process to have the clip removed from YouTube and other sites. Dotcom accused UMG of sending ‘illegitimate takedown notices,’ since UMG did not own the song in question, and Megaupload went on to file a lawsuit against UMG. A statement released by UMG claimed that a special arrangement exists between UMG and YouTube which allows UMG to take down any videos featuring their artists, regardless of copyright status. This claim was later explicitly denied by YouTube, which has since reinstated the video.
Kim Dotcom was arrested at his Auckland home by New Zealand Police in an armed raid. New Zealand authorities were cooperating with the United States’ FBI as well as agencies in Hong Kong, Netherland, Great Britain, Germany, and Canada. According to Dotcom’s defense, the police operation against Megaupload was unnecessarily grandiose: ‘… armed officers arrived in helicopters and dropped into the Dotcom mansion courtyard.’ Dotcom was initially refused bail due to alleged risks of fleeing to Germany, but was granted bail after spending three weeks in jail.
He was released on the condition that he remain within 80 km of his residence and was barred from Internet access. Dotcom subsequently invited New Zealand journalist John Campbell to visit his property and inspect the damage done by police. According to head of security, Wayne Tempero ‘… the force was incredible … Had they simply asked us we would have opened the door to any room they wanted to enter.’ He said Mr. Dotcom seemed shocked by the police action. ‘I remember him saying ‘copyright infringement’ and shook his head, like he’s going ‘what the hell?’ We weren’t building bombs in the cellar, we didn’t have a meth lab bigger than the South Island here. This was a normal family house.’
Kim Dotcom gave his first interview to John Campbell. He explained the close ties of his case to that of ‘Viacom vs. YouTube’; in which the Digital Millennium Copyright Act (DMCA) shielded YouTube from the infringement of its users and described his surprise when he was arrested without trial or a hearing. Kim Dotcom also provided some of the aspects of his defense. Dotcom explains that Megaupload was responsible for 800 files transferred every second and that it would be impossible to police all that traffic. In addition, the US has privacy laws, such as Electronic Communication Privacy Act, which prohibits the administrators from looking into the accounts of the users.
Dotcom has taken part in the Gumball 3000 international road rally on several occasions, winning in 2001 in his Mercedes Brabus Megacar. He also competed in 2004. In a 2004 interview on Belgian Television, he claimed that in Morocco a car was blocking him and ‘he had to bump him off the road. Nothing happened to him.’ He claims he subsequently found out it was the Chief of Police in a ‘civil’ car. Before his arrest, Dotcom was the world’s number one-ranked ‘Modern Warfare 3’ player. The game has more than 15 million online players.
Since 2001, Dotcom has received media coverage as a founder of a Hong Kong based investing company called Trendax. The company claimed to use artificial intelligence to maximize investment return and Dotcom tried to find investors for a hedge fund managed by the company. According to media reports Dotcom never had a proper license to start the fund, though no fraud was suspected. In 2012, Kim announced the launch of Megabox, a new music streaming service to rival Spotify, on twitter.