Megaupload Demands Return of Assets

A judge hears about Megaupload's situation and gets warned about preserving the integrity of the process.

In preparation for a high-stakes criminal prospection of Kim Dotcom and other leaders from Megaupload, the U.S. government caused the seizure of hundreds of millions of dollars and won't let the company purchase its data back from its U.S.-based server. In filings to a Virginia court on Friday, Megaupload lawyers told a judge about the undue prejudice in the government's moves.

On Thursday, before making the request, Megaupload brought up the issue of its new lawyer and the company's seized funds, including $67 million inside U.S. jurisdiction. Megaupload's lawyers told the judge that "the government's actions left the defendants effectively indigent and unable to pay for counsel of their choice."

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The company recently hired star attorney Andrew Schapiro. The formal engagement letter allowed Schapiro to get involved at the initial stage to file motions to preserve evidence. It also allowed Schapiro to withdraw from the case if seized funds couldn't be released.

Megaupload wanted to have the U.S. judge hear about the money situation. For instance, the company's lawyers reports that a Hong Kong judge approved a limited release of funds for employee salaries and reimbursements, but that the judge there otherwise deferred to the U.S. court on whether to freeze or release more of the money. Megaupload's lawyers also report that in New Zealand, a court released a limited amount of funds too for Dotcom's legal defense and living expenses.

Without making a formal request to unfreeze the money just yet, Megaupload's lawyers asked the judge to approve their limited appearance.

Megaupload followed that up on Friday with a play for its old data, currently being held by US-based Carpathia.

According to the filing:

"In essence, the Government has taken what it wants from the scene of the alleged crime and is content that the remaining evidence, even if it is exculpatory or otherwise relevant to the defense, be destroyed. And by refusing to permit Megaupload to use its assets to mount a defense, the Government is effectively making sure that Megaupload has no practical way to preserve the evidence itself.

Such a course of proceeding by the Government would be troubling in any circumstance. But this is, of course a criminal case. It is, in fact, what the Government has called the largest such case it has ever brought in the history of alleged copyright infringement. If the Government's position now wins the day, the integrity of what ensues will be lost -- the Mega Servers will have been wiped and potentially exculpatory or relevant evidence will have been spoliated, en masse, before being properly surveyed by the parties, not to mention the Court."

Megaupload requested that it be allowed to use its own assets, currently frozen, to reach a deal with Carpathia, the server host which has requested relief, citing the high expense of holding onto the data.

The MPAA has objected to giving Megaupload back its data on the theory that if the data is moved to a foreign jurisdiction, Megaupload would have the opportunity to relaunch its service without fear of legal repercussions.


Twitter: @eriqgardner