Megaupload founder awaits bail decision

Megaupload founder Kim Dotcom faces at least another day behind bars.

Kim Schmitz, aka, Kim Dotcom, is the founder of Megaupload, an online file-storage service accused of massive piracy.
(Credit: 3News New Zealand)

"Given the breadth of the issues and the seriousness of the issues, I'm going to reserve my decision," Judge David McNaughton told Auckland's North Shore District Court this afternoon.

Dotcom, 37, was arrested with his three co-accused — Bram van der Kolk, Mathias Ortmann and Finn Batato — in a police swoop at his luxury rural mansion just outside of Auckland on Friday.

The three co-accused are also due back in court on Wednesday for their bail hearing, but judge McNaughton said that they are likely to be treated the same as Dotcom.

Today's bail hearing lasted all day until 4pm, as arguments focussed on the likelihood of Dotcom being a flight risk. The Crown and the New Zealand police both opposed bail for Dotcom, saying that this risk is "at the extreme end of the scale".

In the afternoon, further arguments centred on legal technicalities of whether or not Dotcom was extradited from Bangkok in 2002, as claimed by the prosecution, or whether he co-operated with police, as claimed by the defence.

A matter of a gun found during Friday's police raid raised debate over whether it had been amended, like a sawn-off shot gun, as claimed by the prosecution, or whether it had been acquired legally, as claimed by the defence. Both sides agreed that the gun is unlicensed, something that the defence said is the responsibility of Dotcom's personal bodyguard rather than Dotcom himself.

There was also more debate over the workings of the Megaupload website.

Toohey, for the prosecution, argued that a rewards scheme offering cash prizes to those who made 50,000 downloads was not something that you would expect from a site dealing with personal files. And while "take-down" notices were acted upon, links to such files still existed.

Dotcom, Toohey said, also emailed co-accused not to delete so many links, instructing them to allow Warner Entertainment to remove 5000 per day, but not unlimited numbers.

Defence lawyer Andrew Davison said that Dotcom warned his co-accused about potential action that the legal authorities might take, but said that this was meant as a warning rather than proof of any guilt.

"[This was] not to conceal illegality, but to protect themselves from ill-informed official action."

Davison likened Megaupload to YouTube, saying that the "file-storage facility" aimed to promote creativity of users.

"Paying rewards is good business, [and] not acting in breach of copyright," he said.

A technology known as md5# helped the company track down child pornography, which showed their corporate responsibility, but its use had to be limited, as, like antibiotics, overuse limited its effectiveness.

While Megaupload also recognised take-down notices from major organisations, it had to be wary of notices emitting from places like Mexico, which could be fuelled by owners of rival similar websites, Davison continued.

The defence added that Dotcom had no intention of reactivating his websites until the legalities are resolved. Furthermore, due to Dotcom's distinctive appearance, it is also most unlikely that the German-born New Zealand resident would be able to pass through customs and immigration unrecognised.

In a final comment, the prosecution alleged that Dotcom also has multiple credit cards under multiple aliases, but Davison said that this is because "my client collects them; most of them are out of date".