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24 May - 12:11 am NZ
Updated at 6:24 am on 21 January 2012
New Zealand took centre stage on Friday in the international battle against internet piracy.
As the United States government shut down Megaupload - one of internet's biggest file-sharing sites - police in Auckland arrested the site's founders in a series of raids that netted guns, millions of dollars in cash and luxury cars.
The FBI has been investigating Megaupload which the US accuses of pirating films and other content, costing copyright holders more than $US500 million in lost revenue.
About 70 police - some armed - were involved in arrests made at 10 properties in Coatesville and Orakei in Auckland on Friday morning at the request of US authorities.
They include Megaupload's founder Kim Dotcom, formerly known as Kim Schmitz, a 37-year-old German national and New Zealand resident.
Also arrested were the website's co-founder and chief technical officer Mathias Ortmann, 40, and chief marketing officer Finn Batato, 38, both from Germany, and Dutch national Bram van der Kolk, 29, also a New Zealand resident who oversees programming.
The four men appeared at the North Shore District Court on Friday and made applications for bail. But Judge David McNaughton remanded them in custody until Monday, saying it was too late in the day for the applications to be heard.
Two corporations, Megaupload Limited and Vestor Limited, and three men have been charged overseas.
They are: website graphic designer Julius Bencko, 35, from Slovakia; Sven Echternach, 39, from Germany and head of Megaupload's business development; and Andrus Nomm, 32, a citizen of Estonia and resident of Turkey and Estonia, who is head of the site's development software division.
All seven accused are charged with running an international organised criminal enterprise, allegedly responsible for world-wide online piracy of numerous types of copyrighted works including books, music and movies.
American authorities allege the group has been engaged in criminal copyright infringement and money laundering on a vast scale. The US Department of Justice said the estimated harm caused to copyright-holders was well in excess of $US500 million.
The accused face a maximum penalty of 20 years in prison on the charge of conspiracy to commit racketeering and five years' jail on the charge of conspiracy to commit copyright infringement.
They also face 20 years' imprisonment on the charge of conspiracy to commit money laundering and five years on each of the substantive charges of criminal copyright infringement.
New Zealand authorities executed provisional arrest warrants requested by the US. Police say moves are under way to extradite the four accused in New Zealand to another country.
New Zealand's Organised and Financial Crime Agency, Crown Law and the Office of the Solicitor General assisted police over several months.
More than 20 search warrants were executed in the US and eight other countries on Friday.
Police told a news conference on Friday that when officers arrived at the house Kim Dotcom is leasing in Coatesville they had to use a specific strategy to get through security.
Detective Inspector Grant Wormald, who oversaw the operations, said security at the mansion in northwest Auckland was tight - and it wasn't a matter of the police simply knocking on the door.
"It's a large property, we were aware that there were a number of people there. We had a range of issues that we had to contend with as far as getting from the gate to the door and then securing the people and potential loss of evidence."
Two sawn-off shotguns were among items discovered at the property and seized.
Police also seized assets including luxury cars with an estimated total value of up to $NZ6 million, while more than $NZ10 million has been seized from New Zealand financial institutions. They are continuing to search the property overnight on Friday.
Police said that while they believe New Zealand copyright law had also been breached, they would not be laying charges as the matter was being dealt with internationally.
A lawyer who lives near the Coatesville house said officers surrounded the large property and were stationed at all the driveways and exits.
The neighbour, Rick Shera, who is also a lawyer specialising in the internet, said there is an international battle to crack down on online pirating and Megaupload has been targeted because its founder is a high-profile person.
Mr Shera said that to his knowledge, it is the first time that such an action had been taken in the United States and then enforced in New Zealand.
The lawyer for Megaupload says it will vigourously defend itself against the criminal allegations of copyright infringement and money laundering.
American-based lawyer Ira Rothken told Radio New Zealand's Checkpoint programme on Friday the company is a legitimate business and has been unfairly targeted.
"The company believes that the claims are without merit and will vigourously defend against the claims. Whether it's search engines or You Tube or any user-generated content site, they're littered with other people's copyrights.
"The test for liability isn't whether or not a website actually hosts copyrighted content; the question's much deeper - and that is whether or not an internet service provider should be responsible for other folks uploading and downloading such copy."
Mr Rothken said the US government decided it was going to be both prosecutor and judge and shut the site down.
"There is a significant chance the government could be wrong, and if the government's wrong there really is no way for Megaupload to unring the bell, because now the site's down."
Mr Rothken said the online video site YouTube had similar allegations made against it, but it prevailed.
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