• The Hollywood Reporter on LinkedIn
  • Follow THR on Pinterest

Megaupload's Kim Dotcom: Inside the Wild Life and Dramatic Fall of the Nerd Who Burned Hollywood

Page 1
2012 Issue 16: Kim DotCom

He wanted to be the next Steve Jobs (and talked about starring in a reality TV show). But the outrageous ex-hacker and self proclaimed Dr. Evil, who collected yachts and $400,000 supercars as his file sharing website amassed 180 million users, faces 50 years in prison as showbiz braces for the nastiest piracy fight ever.

This article first appeared in the May 11 issue of The Hollywood Reporter.

Last October, television producer Ziad Batal was summoned to the penthouse of the Grand Hyatt in Hong Kong. The reality TV veteran had been told by a friend, motorcycle designer Alex Mardikian, to get on a plane for a summit with a deep-pocketed acquaintance who was looking to make Hollywood connections. After being chauffeured from the airport to the posh hotel, Batal went to a lunch meeting in a suite with a private entryway dominated by a curious statue: a life-size re-creation of the alien from the Predator movies. Batal was escorted to a conference room and introduced to Kim Dotcom, né Kim Schmitz, the 300-pound-plus, 6-foot-7 German hacker-turned-web mogul who founded Megaupload, the cyber-locker service that offered its 180 million users remote storage of movies, music and other files. The 13th-most-visited site in the world at one point, Megaupload was a pirates' haven -- a Napster on steroids, where members could share everything from Lady Gaga hits to Transformers movies with anarchists' abandon.

Part of the service's appeal was the antihero persona of Dotcom himself. The 38-year-old had become an online celebrity, as much for his over-the-top lifestyle of $400,000 supercars, supermodel hot-tub parties and the slick YouTube video he had made with Kanye West and Kim Kardashian (in it, he raps about Megaupload: "It's a hit! It's a hit!") as for the popularity of his website. And during those two days of meetings with Batal, Dotcom, a self-professed "Dr. Evil" in a loose-fitting black jumpsuit and closely cropped hair, revealed his plan to expand Megaupload, a wildly easy-to-use service, into an empire that would rival that of his idol, Steve Jobs.

STORY: Inside the World of Cyber-Lockers

"The vision was very clear: He wanted to be the biggest entrepreneur in the Internet world," says Batal, who has produced more than 40 mostly documentary and reality programs in Los Angeles and Dubai. "He wanted to take the iTunes model and bring it to movies, video games, everything -- and worldwide." It was a play for legitimacy after years of operating in the shadows. The businessman, said to be worth $200 million -- much of it from the millions he is believed to have pocketed from Megaupload, including $42 million in 2010 alone -- was interested in Jobs-style fame, too. "I discussed a concept of doing a reality show about him being the Donald Trump of the hacking world," Batal says. "He was very intrigued by that. He said, 'Let's do some research and get together again.' "

That reunion never happened. Three months later, in the early-morning hours of Jan. 20, more than 70 New Zealand police officers, including special-tactics personnel, descended on Dotcom's $24 million mansion in the countryside near Auckland. The raid, which culminated in the highest-profile arrest of an alleged copyright "pirate"to date, was the result of years of coordination among local police, the U.S. Department of Justice and the FBI and was carried out by personnel armed with M4A3 automatic assault rifles, Glock handguns, dogs, sledgehammers and saws. Police confiscated nearly $5 million worth of cars as well as eight flat-screen TVs, jet skis and a Predator statue that mirrored the one Batal had seen in Hong Kong. During the raid, Dotcom was tracked down and arrested near a safe that held a loaded shotgun in the 25,000-square-foot property's "Red Room," a secret compartment behind a false door inside a closet. His pregnant wife, Mona, children and staff were found elsewhere in the mansion, which Dotcom had moved into in 2010 after emigrating from Hong Kong.

Dotcom quickly became Hollywood's Public Enemy No. 1, and authorities seized nearly $9 million of his cash, froze more than 50 bank accounts belonging to him, his associates and their various companies and shut down his website (a message from the FBI now appears at Megaupload.com). In its Jan. 5 indictment, the U.S. government accused Dotcom -- who was held at Auckland Central Remand Prison for a month after his arrest -- and six of his Megaupload colleagues of racketeering, money laundering and criminal copyright infringement. According to the 72-page document, Megaupload caused more than $500 million in losses to copyright holders -- including all six major Hollywood studios and the big record labels -- during its roughly seven years of existence. After a court hearing in Auckland on Aug. 20, Dotcom could be extradited to the U.S. for a trial that will be as closely followed as the litigation that led to the end of Napster, Grokster and other early file-sharing websites about a decade ago. He faces up to 50 years in a U.S. federal prison if found guilty of all charges.

STORY: Who Says Piracy Costs the U.S. $58 Billion a Year?

Dotcom was a natural target for U.S. authorities, which are believed to have looked into Megaupload partly at Hollywood's urging. The site, founded in 2005 -- around the time Kim Schmitz legally changed his surname -- boasted of more than 1 billion total visitors, and Dotcom has long drawn attention by chronicling his lavish lifestyle online. He documented a vacation to France (think: Ferraris, a helicopter and yacht) with a 30-minute video posted to one of his now-defunct websites. And countless clips Dotcom uploaded to YouTube show him thumbing his nose at authorities while racing through crowded European streets in his souped-up Mercedes-Benz sedans. "I have a big kid inside me," he has said.

All the while, Dotcom has dodged questions from journalists and business partners about his checkered past as a rogue entrepreneur convicted of insider trading and embezzlement. Indeed, Dotcom had run afoul of authorities several times before. While living in Germany in the 1990s and early 2000s, he started several technology ventures, including an Internet retail site that tanked after he carried out a "pump and dump" scam with the firm's stock; and an e-payment company that cratered after it gave him a large loan. And this is to say nothing of his 1998 computer fraud conviction that stemmed from his hacking exploits. But beyond Dotcom's past issues, the entertainment industry cared about Megaupload because of its sheer size.

VIDEO: 6 Outrageous Kim Dotcom Moments 

"This guy was operating the largest cyber-locker out there -- thousands and thousands and thousands of links to content," says Michael Robinson, executive vp of worldwide content protection at the Motion Picture Association of America, which lobbied the government to take action. "Someone setting up a kiosk and selling counterfeit goods on a street corner in front of a legitimate shop -- you'd expect law enforcement to stop that behavior. That's all we ask for on the Internet."

Although exact figures are hard to come by, piracy has become an epic financial problem for content creators. The Obama administration has claimed that intellectual property theft costs the U.S. $58 billion a year, but some question that figure. The MPAA has said global piracy costs movie studios more than $6 billion a year, and still more money is spent fighting content theft, though the MPAA declined to say what it spends. One thing is clear: The entertainment industry has portrayed Dotcom as the worst facilitator of copyright infringement.