INTRO: Have you ever heard of a site called mega.nz? On the surface, the site looks like a strong competitor to Google Drive. They offer 20 gigabytes of storage, great encryption, and phenomenal download and upload speeds. Considering this, you would think that Mega is a great alternative for Google Drive or iCloud, but the site is rarely used for the same cases. People using mega aren’t saving personal pictures, videos, or documents.
Rather, they’re uploading and sharing the latest movies, games, and software. And instead of the encryption providing safety for its users, it actually makes it harder for copyright owners to track down what’s being shared. Any other founder in this situation would probably freak out given that they don’t want to be hunted down by the FBI. But, the founder of Mega, Kim Dotcom, isn’t phased by the FBI. In fact, the FBI was trying to hunt him down when he launched Mega, and he’s still one of the most wanted people in the world. So, here’s the wild story of Kim Dotcom and how Mega became the go-to cloud platform for pirates.
EARLY TROUBLE: Taking a look back, Kim never had a particularly calm life. He was born on January 21, 1974, in West Germany, and from a very young age, he was interested in hacking. And when I say hacking, I don’t mean hacking league of legends or world of warcraft. No, Kim over here was hacking PBX systems or private branch exchange systems of US companies. When he was just 18 years old, he was hacking the likes of NASA, Citibank, and the Pentagon, and he was selling their access codes for $200.
If you ask me, I think Kim was the one that was really being robbed here. Anyway, in the beginning, Kim wanted to become a cybersecurity consultant, but these dreams would be crushed very early on. You see, prosecutors weren’t exactly happy that this 18-year-old was hacking into national systems and selling access to protected data. So, they kept an extremely close eye on Kim, and it didn’t take them long to arrest him. In March of 1994, German police arrested Kim for selling stolen phone numbers and they threw him in jail for a month.
Right when he got out, they pressed hacking charges on Kim, and Kim ended up being convicted for 11 counts of computer fraud and 10 counts of data espionage. This itself could’ve gotten him locked up for years, but since many of the crimes were committed when he was a minor, the judge decided to go easy on him. The judge simply gave him a two-year suspended sentence and wrote his crimes off as “youthful foolishness”. While Kim didn’t have to spend too much time in prison, given his criminal record, it was going to be nearly impossible to get a job. But, Kim didn’t let this slow him down.
In fact, he used his arrest and conviction to boost his notoriety and fame within the hacking space. Kim became known as the child prodigy hacker, and Kim leveraged this to make a living. He launched a cybersecurity company called Data Protect. It’s not clear when exactly he launched the company, but there are emails suggesting that the company was operating as early as 1994. Anyway, one of their first big contracts was with Lufthansa airlines.
The story goes that Kim secured a contract with Lufthansa after showing them how easily he could hack into the company’s systems. But others argue that this is not actually what went down. First of all, they say it wasn’t Kim that did the hacking, it was actually one of his accomplices. And secondly, the main reason Lufthansa gave him the contract was not because they were impressed by the hacking but because Kim had insider contacts.
We’ll probably never find out what truly went down, but it doesn’t really matter for Kim as he started raking in millions from such contracts. With this new influx of cash, Kim went on a spending spree purchasing supercars, houses, and helicopters. This is when Kim’s public persona shifted from being a nerd hacker to being a rich hacker genius. And let’s just say, Kim loved to play into this persona.
LIVING THE FANTASY: Aside from buying expensive toys, Kim spent significant amounts of money on convincing people that he was the hacker of the people. One example of this was a short animation film that he produced called Kimble Special Agent. The premise of the film is Kim breaking into Microsoft’s headquarters to confront Bill Gates. When Kim finally gets to Bill after a crazy sequence of cars, boats, and helicopters, it’s exposed that Bill is actually using an Apple MacBook.
And, Kim goes ahead and carves out the word Linux on Bill’s wall while Bill pees his pants. It’s quite an odd story, but I gotta say it is amusingly entertaining. Shortly after, Kim also produced another short film called Kimble Goes Monaco. In this film, Kim was just minding his own business and trying to enjoy his vacation. But for some reason, Bill Gates was spying on him the entire time. When the film launched, it was mostly taken as a satirical jab at Bill, but with time, more and more people have started to believe that it’s actually true.
Aside from exposing Bill Gates, Kim spent his time building an internet-based luxury car called the Megacar. The vision was for the car to have a computer, a router, a video conferencing system, and a 17-inch display. The car was supposed to launch for $90,000, but the launch date never came around. Similar to the car being a false promise, many critics argue that Kim’s entire persona was a false promise. According to a New Zealand magazine, Kim was once spotted taking pictures at an airport inside parked airplanes and acting as if they were his own.
While Kim may not have been as rich as he showed off to be, Kim was doing better than ever before. In 2000, he sold 80% of Data Protect to a German conglomerate named TUV Rheinland. The acquisition price was not revealed but it was likely in the tens of millions. Kim could’ve called it quits right here and lived a lavish life for the rest of his days. But Kim was never attracted to the dark side because of the money, he liked the dark side because of the thrill, and it didn’t take him very long to push it too far.
FLEEING TO SAFETY: In January of 2001, when the Dot-Com crash was starting to take full effect, a company called LetsBuyIt.com was nearing bankruptcy. Instead of letting the company die though, Kim went ahead and purchased 375,000 euros worth of shares and announced that he was going to help the company raise 50 million euros to get through the year.
Once this news came out, LetsBuyIt stock exploded and Kim made 1.5 million euros on his initial investment at which point he sold his stake. And as you would guess, the 50 million euro investment never came. This was clearly a pump and dump and prosecutors were once again on the hunt for Kim. But this time, it wasn’t just the prosecutors that were after Kim either. After seeing his dubious investment strategy, the hacking community also turned on Kim.
In an effort to save face, Kim claimed that he had hacked into Osama’s Sudanese bank account and he put a $10 million bounty on Osama’s location. Kim also launched a group called Young Intelligent Hackers Against Terrorism or YIHAT. But, this publicity stunt didn’t work. One hacker named Fluffy bunny actually hacked YIHAT’s website and defaced the website. And with that, Kim knew that he was in trouble and he fled to Thailand. Unfortunately for Kim, Thailand ended up arresting him and deporting him back to Germany.
Kim pleaded guilty to the charges, and somehow, he was released with a slap on the wrist once again. He was sentenced to just 20 months probation and a 100,000 euro fine. Again, you would think that Kim would just lie low and play it safe. But instead, he decided to start a hedge fund. In December of 2002, Kim moved to Hong Kong and founded a new business called Kimpire Limited.
The company’s first subsidiary was called Trendax which promised to leverage artificial intelligence to generate 25% annual returns. Given Kim’s past though, he was not actually allowed to take in investments or trade. Nonetheless, Kim tried to lure in investors using the crazy returns, but this didn’t lead him anywhere. So, Kim tried launching more businesses including Data Protect Limited, Investor Limited, and Monkey Limited. None of these really caught steam though until he delved into the file-sharing business.
MEGA UPLOAD: By the time Kim launched the file-sharing business though, he was well aware that his reputation was toast. So, he decided to start from scratch and rebuild a new reputation. He started off by legally changing his name from Kim Schmitz to Kim Dotcom. He also used holding companies to distance himself from the final product, and he changed the name of Data Protect Limited to Megaupload.
Megaupload was quite early for its time given that it was launched in 2005, so Kim had a pretty good shot at building a reputable file-sharing system. But knowing Kim, I don’t think you’d be surprised to hear that a large portion of his customers were using the service to share movies, music, and cracked software. Megaupload offered faster download speeds for a fee and many users happily paid the price. This was extremely lucrative for Kim, and he was finally making the type of money that he had been claiming to make for years.
Kim followed up Megaupload with a dozen services including Megavideo, megapix, megalive, megapay, and so on and so forth. In the meantime, the FBI thought that the entire thing was a Mega Fraud and started to hunt down Kim once again. Kim, however, was no longer in Hong Kon. He had since moved to New Zealand and acquired permanent residency. But wait a minute, how did a person with criminal conviction secure residency so quickly?
Well, Kim basically bought his way in. He invested $24 million into a mansion in Auckland and he put $10 million in government bonds. These investments made Kim an “investor plus” in New Zealand which granted him residency. The FBI wasn’t going to let this move stop them though. Every second that they wasted was millions of dollars in losses for copyright holders. At the peak of MegaUpload, the site boasted $175 million in revenue, 50 million daily visitors, and accounted for 4% of all internet traffic.
It took the FBI some time, but on January 5, 2012, 3 indictments were filed against Kim which included racketeering, conspiracy to commit copyright infringement, and conspiracy to commit money laundering. And just two weeks later, the New Zealand police raided his house with 76 officers and two helicopters. You might think that this was a bit overkill, and that’s because it was. New Zealand literally sent their anti-terrorism special tactics group to his mansion.
They ended up seizing 18 luxury cars, several large TVs, and $175 million in cash. Shortly after they also froze his 64 bank accounts and his numerous PayPal accounts. And to top it all of, they threw Kim into Mt Eden prison and shut down Megaupload. It seemed like this is where Kim’s story would come to an end, but really, the FBI hadn’t accomplished anything. All they had done was poke the bear. MEGA.NZ Over the next few years, Kim’s lawyers and prosecutors fought back and forth about extradition, jail time, and fines.
You would think that this was an easy case for prosecutors, but that wasn’t really the case. You see, prosecutors had pulled a lot of strings to arrest Kim. First of all, the search warrant was too broad, and New Zealand’s court of appeals found that the FBI’s taking of information was illegal. Secondly, the New Zealand police had been spying on Kim for weeks before they raided his house, and in New Zealand, it is illegal to spy on permanent residents and citizens.
And finally, they had used excessive force when raiding his house as they literally sent an anti-terrorist squad against him. Kim was able to use all these infractions plus a few others to come to a confidential settlement with the police in November of 2017. So, the FBI wasn’t really able to do anything about Kim, but at least they shut down MegaUpload right? Well, they did indeed shut down Megaupload, but Kim went ahead and launched a new file sharing and cloud storage website called Mega.nz exactly one year after the raid on January 19, 2013.
Kim doesn’t want any more trouble with the authorities though, so he’s made it clear that Mega is not for piracy. Kim wants everyone to know that he’s not a piracy king, and he does not support piracy by any means. Mega is designed to be a competitor to Google Drive, and its high level of encryption is simply designed to protect sensitive personal data. That’s it. Similarly, the insanely fast upload and download speeds are just a perk for users. It’s not for downloading massive games and software.
In fact, if you’re a copyright owner and find any of your content on Mega, you can contact Mega, and Kim is more than happy to take down the content. If we’re being real though, mega is just a relaunch of MegaUpload, but this time, Kim is being careful to stay on the legal side of things as much as possible. And that’s how Kim Dotcom became the internet’s most wanted man. Have you guys ever used Mega and what are your thoughts on piracy? Comment that down below. Also, drop a like if you don’t support piracy either just like Kim. And of course, consider joining our discord community to suggest future video ideas and consider subscribing to see more questions logically answered.
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