LOS ANGELES (TheWrap.com) - Federal authorities have charged the owners and operators of the video locker service Megaupload with operating a criminal enterprise that distributes pirated material, the U.S. Justice Department announced on Thursday.
Although the sites they operate advertised that they provide personal storage for users' content, the indictment claims they actually trafficked in hosting television shows and movies -- often offering them to users before their official release.
"Members of the Mega Conspiracy are aware of the way that their sites are actually used by others; have themselves used the systems to upload, as well as reproduce and distribute, infringing copies of copyrighted content; and are aware that they have financially benefited directly from the infringement of copyrighted works that they are in a position to control," the indictment reads.
Kasseem Dean, best known as music producer "Swizz Beatz" and as the husband of Alicia Keys, is not named in the indictment, even though he reportedly serves as Megaupload's chief executive officer.
Megaupload and its sister sites accept online advertising and generate more than $175 million annually, according to a U.S. Justice Department indictment.
The copyright violations are on the order of $500 million in damages, according to the indictment.
The owners and operators of the sites are charged with five counts of copyright infringement and conspiracy. In an announcement, the Justice Department said it ranks "among the largest criminal copyright cases."
It also comes as two bills that would give the Justice Department broader authority to crack down on internet piracy have been hobbled by protests from companies such as Google and Twitter. Tech companies claim the legislation would violate the First Amendment.
Ira Rothken, an attorney for Megaupload, did not immediately respond to requests for comment.
The Megaupload owners each face a maximum penalty of 20 years in prison on the charge of conspiracy to commit racketeering, five years in prison on the charge of conspiracy to commit copyright infringement, 20 years in prison on the charge of conspiracy to commit money laundering and five years in prison on each of the substantive charges of criminal copyright infringement.
The indictment alleges that the criminal enterprise is led by the site's founder Kim Dotcom, also known as Kim Schmitz and Kim Tim Jim Vestor, residents of both Hong Kong and New Zealand.
Also charged are the company's Chief Marketing Officer Finn Batato, a German citizen; graphic designer Julius Bencko, a Slovakian citizen; business development chief Sven Echternach, a German citizen; Chief Technical Officer Mathias Ortmann, a German citizen; software programmer Andrus Nomm, an Estonian citizen; and programmer Bram van der Kolk, aka Bramos, a Dutch citizen.
Dotcom, Batato, Ortmann and van der Kolk were arrested Thursday in Auckland, New Zealand, by local authorities. Bencko, Echternach and Nomm remain at large.