The Hosting Controversy by Kim Dotcom

Kim Dotcom

"If someone sends something illegal in an envelope through your postal service... You don’t shut down the post office"

- Kim Dotcom

Kim Dotcom was first known for his controversial past as a hacker. With his dedication and interest, he has made the internet as his way for fame and fortune. Dotcom later became an international internet tycoon and owner of Megaupload, a media sharing empire that authorities are calling a racket for trafficking in illegal videos and photographs.

Dotcom, who also called himself Kimble after the wrongly convicted doctor-on-the-run in the film "The Fugitive," became well known for his lavish lifestyle as much as his computer skills.

Early Life

Kim Schmitz was born on January 21st, 1974, in Kiel, West Germany. Schmitz grew up in northern Germany. As a child, Kim Schmitz, or more publicly known as Kim Dotcom, Kimble and Kim Tim Jim Vestor he made copies of computer games to sell to his friends, and in the early days of the internet, he began hacking into computers via telephones.

Schmitz has made no secret of his controversial past as a cyber-raider, hacking into computer networks at NASA, the Pentagon, the corporate PBX systems, and at least one major bank. His early life in computer hacking has acquired him a reputation in Germany.

In 1994, he was arrested by German police for trafficking in stolen phone calling card numbers. He was held in custody for a month, released and arrested again on additional hacking charges shortly afterwards. He was convicted of 11 counts of computer fraud, 10 counts of data espionage, and an assortment of other charges. He received a two-year suspended sentence - because he was under age at the time the crimes were committed. The judge in the case said the court viewed his actions as "youthful foolishness."

As the hacker pioneer generation came of age, so did Schmitz. After being convicted of computer hacking in 1998, he was made success when he provided computer security consulting and venture capital investment via the firm Kimvestor.

In 2001, Schmitz bought €375,000 worth of shares of the nearly bankrupt company and subsequently announced his intention to invest €50 million in the company. The announcement caused the share value of to jump and Schmitz cashed out, making a profit of €1.5 million.

Later, Schmitz moved to Thailand to avoid investigation where he was subsequently arrested on behalf of German authorities. In response he allegedly pretended to kill himself online posting a message on his website that from now on he wished to be known as "His Royal Highness King Kimble the First, Ruler of the Kimpire". He was deported back to Germany where he pleaded guilty to embezzlement in November 2003 at a Munich court. He was sentenced him to 20 months probation and a 100,000-euro fine. After avoiding a prison sentence for a second time, he left Germany and moved to Hong Kong in late 2003.

Soon after moving to Hong Kong, Schmitz registered Kimpire Limited in December 2003. He set up a network of interlinked companies, including Trendax which was claimed to be an artificial intelligence-driven hedge fund delivering an annual return of at least 25 percent. However, Trendax was never registered with Hong Kong’s Securities and Futures Commission and the company was legally not allowed to accept investments or to conduct trades. Dotcom was subsequently convicted for failing to disclose his shareholding to the Securities and Futures Commission, and was fined 8,000 Hong Kong dollars.


In 2005, Kim Dotcom launched Megaupload Ltd that ran a number of online services related to file storage and viewing. The online company had a registered office is in Room 1204, on the 12th floor of the Shanghai Industrial Investment Building in Wan Chai, Hong Kong.

Megaupload web services included a one-click hosting service, an image hosting video hosting services, a music hosting service and hosting for pornographic contents. The company also had advertisement and financial services, and two additional services that were still in development before their closure.

Megaupload had more than 82 million unique visitors per month with over a billion page views according to its history. With 50 million visitors per day and 180 million registered members, Megaupload that stored 25 petabyte of data for its 12 billion unique files, harvested 4 percent of the global internet traffic, and made the 13th most visited site on the internet.

Megaupload was successful in its young age that Schmitz became a millionaire. Kim Schmitz changed his surname to Dotcom in 2005, apparently in homage to the technology that made him a millionaire, while living in Hong Kong where he set up Megaupload.

The Closure and Arrest

Kim Dotcom

At the time of his arrest, in 6:46 AM local time, New Zealand police swarmed Dotcom's property. As 76 officers swarmed the area, Dotcom reportedly barricaded himself in a panic room built into his bedroom and armed himself with what appeared to be a sawed-off shotgun, police said.

Dotcom was arrested on January 20, 2012, just when he was about to turn 38 the next day. Dotcom was reported to have been arrested during or just after his birthday party.

With $175 million total worth of assets in which includes vehicles, artwork, bank accounts and giant-screen television owned by Dotcom and his Megaupload employees, according to the U.S. Department of Justice, Dotcom and Megaupload has made $500 million worth of monetary damage to copyright holders.

At the time of his arrest, the domain names and sites associated with Megaupload were seized shut down by the United States Department of Justice. Dotcom and three other executives (Bram van der Kolk, Finn Batato and Mathias Ortmann) were arrested for allegedly operating as an organization dedicated to copyright infringement. HK$330 million (approximately $42 million) worth of assets were frozen by the Customs and Excise Department of Hong Kong.

When arrested, Dotcom denied any wrongdoing, and the case against Dotcom, who is a resident of New Zealand, has been the subject of controversy over its legality. The U.S. judge handling the case has expressed doubts about whether the case will come to court.

The shutdown of Megaupload led to denial-of-service attacks on a range of websites belonging to the U.S. government and copyright organizations.

Dotcom that before has received a two-year suspended prison sentence for hacking banks and utility companies, and stealing trade secrets over a four-year period, and was convicted in Germany for embezzlement and for insider trading by purchasing a faltering shopping website, announcing he would invest millions, then cashing in the soaring stock without putting any money into it, was arrested with three others on a U.S. indictment for an alleged conspiracy of criminal copyright infringement, money laundering and racketeering.


On January 19th, 2013 at 12:47 PM local time, Megaupload was re-launched as Mega under the domain name The re-launch date was chosen to coincide with the one year anniversary of Megaupload's take down by the FBI. After the Gabonese Republic denied the new company the domain name, Kim Dotcom announced it would instead be registered in his adopted home of New Zealand under the domain name

On Twitter, Dotcom reported that over 100,000 users are registered within the first hour, speculating that this may make Mega the fastest-growing startup in history. Dotcom also reported on Twitter, that Mega was getting thousands of user registrations per minute. Despite the massive demand from former Megaupload users, Mega has little to no test to overcome the traffic. "We launched Mega without traffic tests. That's like building a sports car from scratch and taking it straight to the Gumball," said Dotcom.

To prevent any failure he had in the past, Dotcom has said that data on the Mega service will be encrypted client-side using the AES algorithm. Since Mega does not know the encryption keys to the uploaded files, they cannot decrypt and view the contents and therefore cannot be responsible for the uploaded contents. Dotcom stated that encrypting files allows them to work with a larger number of data hosting companies around the world, decreasing the likelihood of a Megaupload-style seizure of servers by one government. He mentioned in an interview that "each file will be kept with at least two different hosters, at least in two different locations," and "that’s a great added benefit for us because you can work with the smallest, most unreliable hosting companies. It doesn’t matter because they can’t do anything with that data."

The Mega team indicated that some companies, such as film studios, will have direct access to remove files if they discover the encryption keys online and determine that the content infringes their copyright. Dotcom added that if such companies want to use that tool they would have to agree, prior to receiving access, not to sue Mega or hold the site accountable for the actions of its users.

According to Mega, free users will get 50 GB of free storage space. And for paid accounts, total bandwidth will be limited, from 1 to 8 TB per month.

On September 4, 2013, Dotcom stepped down as director of Mega, and announced that he was working on Baboom, a music streaming service that Dotcom says will be more advanced than Megabox.

On March 2014, Dotcom made a deal for Mega to be listed on New Zealand's stock exchange. He tweeted about the site's huge success, saying that users have stored nearly one billion encrypted files in the Mega cloud and are uploading as many as 11 million files per day.

Personal Life

Kim Dotcom

Kim Schmitz changed his surname to Dotcom in 2005, while living in Hong Kong where he set up Megaupload.

Dotcom that maintained his trademark air of casual confidence, is known for his lavish lifestyle prior of his arrest in New Zealand. Dotcom that holds passports from Germany, where he was born with the name Kim Schmitz, as well as Finland, is a resident of New Zealand and Hong Kong.

In 2001, Dotcom's main source of income was from Kimvestor which he valued at €200 million.

Dotcom has a passion for automotive in which he placed 18 luxury cars that include: 15 Mercedes-Benz, a pink 1959 Cadillac and a Rolls-Royce Phantom Drophead Coupe worth more than $400,000. His license plates told a tale of pomposity, reading KIMCOM, HACKER, STONED, GUILTY, MAFIA, GOD and POLICE.

Beside cars, he is also known for spending money on boats. On one occasion he spent $1 million chartering a 240-foot luxury yacht and moored it in Monte Carlo harbour during the Monaco Formula One Grand Prix and threw lavish parties for guests including Prince Rainier of Monaco.

The 6-foot-7-inch, 120 kilograms (290 lb) multimillionaire boasts a playboy lifestyle, complete with models and participated in the eccentric road rally known as Gumball 3000, where he drove at high speed. In a YouTube video, he is shown boasting of paying off cops who had pulled him over in Morocco.

Dotcom also made his own film, in which it was shot with a hand-held camera. At one point in his peak of success with Megaupload, Dotcom likes to feature photographs of himself racing cars, shooting an assault rifle, flying with private jet on lavish vacations, and holding models in his arms.

"I have a different attitude towards money than those who rather hoard it," Dotcom said during an appearance on late-night talk show in Germany. "I would rather spend it and have a lot of fun."

Dotcom is married to Mona, a model from Philippines. The couple met in November 2007 and were married in July 2009, on the day after her birthday. The couple have five children. Dotcom became the father of twin girls (his fourth and fifth children) when his wife gave birth in Auckland a month after he was released on bail from Mt. Eden prison. Dotcom instructed hospital personnel to send the placenta to the FBI for forensic analysis "so they can verify there is no pirate DNA".

Dotcom and his family lived in a a 25,000-sq.-ft. mansion worth $24 million in Coatesville, New Zealand, 15 miles northwest of Auckland. The mansion is known as one of the most expensive properties in the country. He and his family moved into the mansion after they were granted residency after promising to invest at least NZ$10 million ($8 million) in New Zealand on 29 November 2010. At the time his residency application was being considered, Dotcom had made charitable contributions in New Zealand and was planning a huge fireworks show for the city of Auckland at a cost of NZ$600,000. In an interview, Dotcom said residency would allow him, his wife, Mona, and their children to live in a country that would become a rare paradise on Earth. "I might be one of the most flamboyant characters New Zealand has ever seen but my intentions are good and I would like to see New Zealand flourish to its fullest potential," he said.

About his file-sharing business that met legal issues, Dotcom stated that the company had actively tried to prevent copyright infringement by forcing users to agree to its terms of service that they would not post copyrighted material to the website. Companies or individuals with concerns that their copyright material was being posted were given direct access to the website to delete infringing links. He also said that he employed 20 dedicated staffs to manage these copyright problems. However, Mega transfers over 800 files every second and he explained that it was impossible to track all that traffic.

Dotcom claims himself to be a legitimate businessman and have "spent millions of dollars on legal advice over the last few years" to ensure that his business is protected by DMCA (U.S. law that is protecting online service providers of liability for the actions of their users).

Before his arrest in New Zealand, he was the world's number one-ranked Modern Warfare 3 player out of more than 15 million online players. On 23 January 2012 he lost the position and dropped to number two.

Dotcom owns several World War II memorabilia that include an autographed copy of Adolf Hitler's Mein Kampf, a cigar holder from Winston Churchill and a pen from Joseph Stalin.