Just as last week was coming to an end, reports of Megaupload being shutdown surfaced the web, catching the attention of Anonyous, the hacker collective known for taking down unjust web sites. The commotion led to a hacking-frenzy day, and  the Megaupload site now shows a warning from the US Department of Justice, the Federal Bureau of Investigation, and the National Intellectual Property Rights that the site had been seized.

Kim Schmitz (who had his name legally changed to Kim Dotcom), founder of Megaupload, along with three others, were arrested last Friday.  During the arrest, authorities stated that they carried out 10 search warrants, seizing 18 luxury vehicles valued at NZ$6 million ($4.8 million), including a Rolls Royce Phantom Drophead Coupe and a 1959 pink Cadillac.  As much as NZ$11 million in cash was restrained in various accounts, guns, and artwork.

Flight Risk

Today, Dotcom appeared in court for a bail hearing, pleading not guilty to charges filed against him.  But Prosecutor Anne Toohey argued that Dotcom should not be granted bail, as he may be considered as a flight risk “at the extreme end of the scale” because it is believed that Dotcom still has other funds that he can access, has multiple identities and a history of fleeing criminal charges.

Dotcoms’ lawyer, Paul Davison, argued that Dotcom could not flee the country if he wanted to because his passports had been seized, accounts frozen, and Dotcom’s distinctive appearance would not go unnoticed in their country’s customs, immigration lines and other controls.  Davidson also argued that his client was being misrepresented in court as Dotcom’s “business did not reproduce or copy material as alleged.”

Judge David McNaughton was not able to hand down a ruling because of the seriousness of the issues presented, stating he would issue a written order no later than Wednesday, January 25th.

Megaupload Takedown Effect

Megaupload’s current woes have affected an entire industry.  FileSonic, the online storage service, disabled all the file sharing functionality of their service.  The site posted the the following notice on their site:

“All sharing functionality on FileSonic is now disabled.  Our services can only be used to upload and retrieve files that you have uploaded personally.”

While another file sharing site, Uploaded, blocked US users from their site all together.  When US users go to their site, they are held back by a landing screen with the following notice:

“Not available.  Our service is currently unavailable in your country. Sorry about that.”

The two sites are hosted outside the US, FileSonic being in the Netherlands and Uploaded in Hong Kong.  Megaupload, too, is based outside of US borders, but that didn’t stop US authorities from shutting it down, so it’s not surprising that other file-sharing services are now taking precaution.  Though the two sites have yet to issue a public statement as to why they suddenly changed their service offerings, it’s difficult to ignore Megaupload’s impact.