Kim Dotcom Fights U.S. Government's Attempt to Seize $67 Million in Assets

The money is allegedly tied to the "Mega Conspiracy"

Although Megaupload founder Kim Dotcom has had a rough few months, he at least is in the comfort of his New Zealand mansion rather than a United States jail cell awaiting prosecution for criminal copyright infringement. No telling exactly when Dotcom will be extradited, but there could nevertheless soon be some courtroom activity examining allegations and evidence against Megaupload and its executives.

That's because in late July, the United States brought a new civil complaint for forfeiture in rem, a maneuver to firmly establish hold over some $67 million in Megaupload's seized assets including money from bank accounts around the world, luxury cars, big televisions, watches, artwork and other property. To prevail, the government won't need to convict Dotcom; only show that the proceeds derive from illegal activity — namely the scheme it calls the "Mega Conspiracy."

On Friday, Dotcom's lawyers filed a motion to dismiss the complaint.

"In resorting to civil forfeiture, the Government veers further astray," states a memorandum. "Notably, the Government is going after foreign assets that lie beyond reach of the Court’s in rem jurisdiction, based on allegations that surpass the outer limit of the law and are in any event divorced from the foreign assets at issue."

Unlike Dotcom's past attempt to dismiss the criminal complaint, based on an unsuccessful argument that the government failed to serve a summons properly, the defendants' lawyers likely won't have the problem of standing, fighting without Dotcom showing up in Virginia.

Still, because the government needs only show that there is a probable cause that the property is subject to forfeiture, Dotcom's lawyers will probably be the ones facing the bigger legal burden here. Their goal isn't necessarily to demonstrate Dotcom's innocence, but rather to attack the government's basis for asserting a crime, knowledge of the property's illegal use or connection to a crime.

In the motion to dismiss, Dotcom's lawyers do all of that — saying that "there is no such crime as secondary criminal copyright infringement," the supposed predicate of the conspiracy. They cite the background of cloud based storage and fault the government for not pleading with enough sufficiency the facts supporting the alleged acts of copyright infringement as well as Dotcom's connection and his willfulness. Additionally, they question how the government is tying the seized assets to the charges against Dotcom.

"The Government’s Complaint subjects to forfeiture every known cent ever earned by Megaupload," says the memorandum. "Such relief does not follow, however, unless Megaupload collected proceeds only from the United States, every penny Megaupload earned from the United States was in furtherance of criminal copyright infringement, and Megaupload earned revenue only within the statute-of-limitations period."

Finally, there are all sorts of jurisdictional issues raised by Dotcom's lawyers over a forfeiture proceeding that's argued to be based on "extraterritorial conduct that is altogether beyond the reach of U.S. copyright law" and "over tens of millions of dollars worth of assets located in New Zealand and Hong Kong."

It appears that Dotcom's lawyers will finally get a chance to argue against at least some of the merits of the underlying case against him. That will probably please him after he has suffered a string of embarrassments in the past few months including the defeat of his Internet Party in New Zealand elections, the severing of ties with the music company Baboom, a report that branded his new storage service a piracy haven, and the collapse of his marriage.

Email: Eriq.Gardner@THR.com
Twitter: @eriqgardner

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