Kim Dotcom allegedly wrote that at some point a judge would be convinced "about how evil we are", a court was told today.
His long-awaited extradition eligibility hearing follows FBI charges laid in January 2012 when the internet entrepreneur and three others - Mathias Ortmann, Bram van der Kolk and Finn Batato - were arrested on charges of criminal copyright violation.
The hearing began in Auckland District Court this morning where Christine Gordon, QC, on behalf of the US government described the case as one of straight-forward fraud.
"In the long prelude to this hearing much has been said about the novelty and technicality of the case," she said.
"When distractions are stripped away it boils down to a simple scheme of fraud."
Ms Gordon explained how the Megaupload file-sharing site looked lawful at a glance but had a "private back door".
"This appearance of front-end innocence was deliberately contrived," she said.
"The respondents were part of a conspiracy which deliberately attracted copyright-infringing material to the website and deliberately preserved it to make vast sums of money."
Ms Gordon drew the court's attention to several conversations between the defendants on Skype.
Dotcom allegedly wrote: "At some point a judge will be convinced about how evil we are. Then we're in trouble. We have to make ourselves invulnerable."
At its peak the site was attracting 50 million unique daily visitors, accounting for 4 per cent of all internet traffic.
They made $25 million from advertisers but Ms Gordon said their main source of revenue was small fees paid by the huge numbers of users, which totalled more than $150 million.
Megaupload worked like a "hard drive connected to the internet" and she said the web traffic was driven by users uploading popular copyright-infringing material.
It is alleged the defendants rewarded users with cash and online privileges for doing this, with Dotcom calling it "our growth motor".
"No smokescreen of compliance with legal requirements can be blown over this," Ms Gordon said.
Copyright holders would frequently issue the website with "take-down notices" but it is alleged Dotcom and others only removed the URL links, while keeping the offending material.
"We have the incredible spectacle of processing take-down notices while at the same time paying many of those same repeat offenders," Ms Gordon said.
Who they are (according to the Crown)
• Kim Dotcom
Title: Chief executive officer and latterly chief innovation officer at Megaupload Ltd.
Roles: He allegedly supervised development of the company's websites and had a responsibility to make all major decisions. He negotiated contracts with internet service providers, servers and advertisers and all strategy and policy decisions went through him.
• Mathias Ortmann
Title: Chief technical officer
Roles: He oversaw the company's use of software programmes and funds from the alleged "rewards scheme" were distributed by him. He has known Dotcom since 1989 and is a 25-per-cent shareholder in Megaupload Ltd.
• Bram van der Kolk
Title: Programmer in charge of Megaupload.
Roles: He oversaw the software programmes and administered the alleged "rewards scheme" with the websites most valuable users. He has known Dotcom since 2004 and is a 2.5-per-cent shareholder in Megaupload Ltd.
• Finn Batato
Title: Chief marketing and sales officer.
Roles: He sold advertising space and supervised the company's international sales team. He has known Dotcom since 1992.
How Megaupload worked:
The website was like "a hard drive connected to the internet", according to the Crown, containing millions of illegal videos. It is alleged that Megaupload's "front page" was purely window dressing to make it seem like a legitimate website. Christine Gordon, QC, said the top 100 most popular videos list on the home page was contrived to only contain legal material. A real top 100, she said, would reveal the extent of their offending and their knowledge of it "and that would never do".Megaupload users who directed the most web traffic to the site were allegedly plied with "rewards" of cash and website privileges. Ms Gordon said this was done in the face of hundreds of thousands of "take-down notices" issued by the copyright holders. Users would upload hugely-popular, copyright-infringing content which could be found via internet search engines. Some content on the site was available for free but users had to pay membership fees for full access.
- NZME.
