U.S. Government Allowed to Keep Kim Dotcom Money

A federal judge agrees that Kim Dotcom fits the definition of a "fugitive" whose property has been seized properly.

On Friday, the U.S. government won its biggest ruling yet in its ongoing legal campaign against Megaupload founder Kim Dotcom and his cohorts. A federal judge is allowing prosecutors to seize an estimated $67 million in assets tied to Megaupload on the basis that he's a "fugitive."

The ruling comes as Dotcom continues to fight extradition from his home country of New Zealand. The Justice Department brought a civil complaint for forfeiture in rem, which caused Dotcom's attorneys to attack the government's basis for asserting a crime, knowledge of the property's illegal use or connection to a crime.

Dotcom's lawyers have doubted that secondary copyright infringement — basically, facilitating others to pirate — amounts to a violation of criminal law. In his opinion, U.S. District Judge Liam O'Grady writes that defendants are ignoring the allegation of conspiracy.

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"According to the complaint, every time an Internet user uploaded an infringing file to the Megaupload website, Mega reproduced the file on at least one computer server it controlled and provided the uploading user with a uniform resource locator ("URL") link, allowing anyone with the link to download the file," writes the judge. "The conspirators also allegedly provided monetary payments to the top uploaders of infringing content in order to encourage Internet users to upload infringing files onto the Mega sites."

The judge adds that Megaupload had a list of "Top 100" files, yet nods to the allegation that the site scrubbed the list of infringing files to make itself look more legitimate. That goes to knowledge and shows "overt acts in furtherance of the conspiracy," he decides.

Dotcom and other claimants to the seized assets also challenged the jurisdiction of the court with the U.S. government aiming to use the "fugitive disentitlement doctrine" to have Dotcom's objections ruled out-of-order.

Much of the assets — including money from bank accounts, luxury cars, big televisions, watches and artwork — are located in Hong Kong and New Zealand. Megaupload operated in part with the use of servers located in Virginia, where the multiple proceedings against Dotcom are being handled. The judge finds sufficient contact to his jurisdiction.

Judge O'Grady deems it most relevant that Dotcom has declined to enter the U.S. in order to avoid criminal prosecution. The judge cites the defendant's tweets and press interviews, including one where he said he'd go to the U.S. if he was given a "guarantee of a fair trial" and another where he offered $5 million to anyone with "anything to leak about the Megaupload case" resulting in his victory.

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"Dotcom's statements, made publicly and conveyed by his attorneys to the government, indicate that he is only willing to face prosecution in this country on his own terms," writes the judge. "Dotcom has indicated through his statements that he wishes to defend against the government's criminal charges and litigate his rights in the forfeiture action. If it is truly his intent to do so, then he may submit to the jurisdiction of the United States."

Elsewhere in the opinion (below), the judge addresses foreign treaties and the constitutionality of property seizures, finding no conflicts and opining that Dotcom and others once working at Megaupload can fight for their rights in New Zealand, but it doesn't mean that "disentitlement cannot be ordered separately against a claimant who evades the jurisdiction of the United States."

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