Megaupload Founder Kim Dotcom Denied Bail

A New Zealand judge has denied bail to Megaupload founder Kim Dotcom, who will remain in custody until a hearing next month to determine whether he's extradited to the United States to answer charges of committing massive copyright infringement, racketeering and money laundering.

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"With sufficient determination and financial resources, flight risk remains a real and significant possibility which I cannot discount and bail is declined," Judge David McNaughton said in a written decision.

If Dotcom, born Kim Schmitz, is handed over to U.S. authorities, he'll take center stage in a high-profile criminal prosecution that targets hundreds of millions of dollars in seized assets stemming from last week's raid on the operations of Megaupload.

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Still left to be determined is the name of the lawyer who will be defending Dotcom and his colleagues in court.

Robert Bennett, a top white collar defense attorney at Hogan Lovells who was originally tapped to lead the defense, reportedly had to withdraw due to a conflict. There's been speculation that big media companies put pressure on Bennett's withdrawal. AmLaw Daily noted that one of the firm's largest clients is News Corp., whose chairman Rupert Murdoch has been vocal in recent weeks about the need for the Obama administration to crack down on piracy.

Meanwhile, in the wake of the government's 72-page indictment that caused the shutdown of Megaupload and ensnared its leaders, many other tech companies have been looking in the mirror and examining their own risks.

Filesonic, one of the biggest personal storage companies counting more than a billion page views each month, has decided to cut off sharing among its users. Other companies have tried to limit exposure in other ways, including Uploaded.to, which cut off access to the U.S., and FileServe and VideoBB, which shut down their affiliate programs.

Still, other storage services, such as MediaFire, Dropbox, and YouSendIt, all services often used to trade files, have expressed confidence that they will stay out of trouble. Daniel Raimer, an attorney for Rapidshare, expressed the opinion in an interview with Fast Company that federal authorities won't target his company, and if they did, he believes there would be nothing stopping them from going after Google, Apple, or Microsoft.

As all this happens, Dotcom sits in a jail cell.  His New Zealand lawyer says he'll appeal the judge's denial of bail, a decision that was based in part on the discovery of weapons in Dotcom's mansion . The extradition process could take some time, say legal observers.

E-mail: eriqgardner@yahoo.com

Twitter: @eriqgardner