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FBI shuts down giant site Megaupload as four are arrested in internet piracy probe

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By Noel Young, Correspondent

January 20, 2012 | 4 min read

America's FBI has shut down one of the world's most popular file-sharing websites Megaupload as an argument rages over whether to give the US government new powers to crack down on Internet pirates, the Wall Street Journal reports today.

The FBI anti-piracy seal

The US authorities claim Megaupload , based in Hong Kong, and its sister sites generated more than $175 million in criminal proceeds and caused more than half a billion dollars in harm to copyright owners, says the Journal.

Four employees are said to have been have been arrested in Auckland, New Zealand, and charged with conspiracy to commit racketeering and criminal copyright infringement.

The raid "heats up a growing political debate that has pit Internet liberties against copyright enforcement," said the WSJ.

Fox News said the action came a day after a 24-hour blackout of popular websites such as Wikipedia drew national attention to the issue.

"This action is among the largest criminal copyright cases ever brought by the United States," the Justice department said in a statement about the indictment.

The indictment accuses seven individuals and two corporations -- Megaupload Limited and Vestor Limited -- of costing copyright holders more than $500 million in lost revenue from pirated films and other content. It was unsealed on Thursday, and claims that at one point Megaupload was the 13th most popular website in the world, said Fox.

Megaupload had high-profile support from celebrities, musicians and other content producers who are most often the victims of copyright infringement and piracy. Before the website was taken down, it contained endorsements from Kim Kardashian, Alicia Keys and Kanye West, among others, Fox reported.

In response to the FBI action , the Anonymous hacker group said on Thursday it had brought down the U.S. Justice Department's website and several others.

The department said its web server was experiencing "a significant increase in activity, resulting in a degradation of service." Officials described it as a malicious act .

The FBI's indictment named Kim Dotcom, 37 , as founder and until last year chief executive of Megaupload. He was one of the four arrested on Thursday.

A lawyer for Megaupload in California said "the allegations do not appear to have support in the law, and the company is going to vigorously defend against them."

Befor Megaupload's website was taken down, the company wrote that "the vast majority of mega's Internet traffic is legitimate, and we are here to stay."

The WSJ said sites such as Megaupload, known as cyberlockers, "had shifted the technology and business of stealing content" - offering

pirated movies, TV shows, music and e-books - and accounting for about half of all online pirate activity, said the WSJ report.

The FBI said there was no connection between the arrests and the debate over two pieces anti-piracy legislation: the Stop Online Piracy Act in the House of Representatives and Protect IP [Intellectual Property] Act in the Senate.

As politicians abandoned their support for the legislation, in response to the internet 24-hour protest, News Corp boss Rupert Murdoch tweeted, "Seems blogosphere has succeeded in terrorizing many senators and congressmen who previously committed. Politicians all the same."

The Wall Street Journal , quoting an official, said the four arrests were made on Thursday at the recommendation of the authorities in New Zealand.

The FBI indictment claims Megaupload took in $110 million over five years in membership fees and other payments via a PayPal account.

The report said the U.S. was moving to seize property, including more than $175 million and some of the bosses' perks including a 2010 Maserati, a 2008 Rolls Royce, and a number of Mercedes Benzes.

One official described the Megaupload case as "a deterrent to anyone who might engage in large-scale illegal file-sharing".

Chris Dodd, CEO of the Motion Picture Association of America, called Megaupload "the largest and most active criminally operated website targeting creative content in the world."

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