Cyber fugitive Dotcom mocks authorities: "From 0 into a $210m company"

WELLINGTON Tue Mar 25, 2014 9:49am IST

An actor in police costume mock-arrests Megaupload founder Kim Dotcom (L) as he launches his new file sharing site ''Mega'' in Auckland January 20, 2013. REUTERS/Nigel Marple/Files

An actor in police costume mock-arrests Megaupload founder Kim Dotcom (L) as he launches his new file sharing site ''Mega'' in Auckland January 20, 2013.

Credit: Reuters/Nigel Marple/Files

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WELLINGTON (Reuters) - Kim Dotcom, one of the world's most wanted cyber fugitives, on Tuesday gloated over a deal that will see a cloud storage firm he founded while on bail listing on the New Zealand stock exchange and valued on paper at NZ$210 million.

The flashy internet mogul, who also goes by the name Kim Schmitz, is fighting a bid by U.S. authorities to extradite him from the lavish estate he lives in New Zealand to face online piracy charges over the now closed file sharing site Megaupload.

The New Zealand government in early 2012 arrested Dotcom at his mansion near Auckland in a SWAT-style raid requested by the Federal Bureau of Investigation. Dotcom is free on bail as he fights extradition although his movements are restricted.

After a reverse takeover deal was announced between Mega Ltd and TRS (TRS.NZ), an inactive local investment firm, Dotcom tweeted: "Indicted. Raided. On Bail. All assets frozen without trial. But we don't cry ourselves to sleep. We built #Mega from 0 into a $210m company."

TRS said in a statement to the New Zealand stock exchange it had a conditional agreement to buy Mega Ltd through a share issue to Mega's shareholders, which will result in them holding 99 percent of TRS.

The plan, expected to be completed by the end of May, would see the issue of 700 million new TRS shares at 30 NZ cents each, after which TRS's current 1.1 billion shares would be reduced to about 7 million.

Mega Ltd, launched in 2013 by Dotcom and several other people involved in Megaupload, offers encrypted, cloud-based data storage. It claims about 7 million registered users.

New Zealand company records show Mega Ltd's shareholders include Dotcom's wife, through a trust, with a 26 percent stake. Dotcom is not listed as a shareholder nor a director, but on the Mega website he is called principal strategist.

Dotcom, a large, ebullient German national with New Zealand residency, could not be reached for comment.

He and three colleagues from Megaupload were arrested in 2012 on U.S. charges of online piracy, money laundering and racketeering.

The four men have been battling New Zealand and U.S. federal authorities through the courts since over access to funds, admissibility and disclosure of evidence, and the legality of search warrants. An extradition hearing is tentatively scheduled for July.

U.S. authorities allege Megaupload cost film studios and record companies more than $500 million and generated more than $175 million by encouraging paying users to store and share copyrighted material, such as movies and TV shows.

Dotcom says Megaupload was merely an online warehouse and should not be held accountable if stored content was obtained illegally.

EXTRADITION BATTLE NOT A CONCERN

Mega Ltd chief executive Stephen Hall said Mega had planned to list but had chosen the back-door route because it was cost effective and efficient, adding there was no concern it would get embroiled in Dotcom's extradition battle.

"We don't think so, this has nothing to do with Megaupload, it's a completely separate legal entity, it's not a worry," Hall told Reuters.

Hall also said he did not expect Mega Ltd's shareholders to sell once the deal was completed. The company did not need extra funds at this stage, and was supported by investors, some of whom were associates of Dotcom, Hall said.

Shares in the rarely-traded TRS perked up after the announcement, rising 900 percent to one NZ cent - giving it a market capitalisation of about NZ$11 million.

Dotcom remains at his rented sprawling estate outside Auckland, valued at an estimated at NZ$30 million, with its servants' wing, hedge maze, and life-size statues of giraffes and a rhinoceros in the grounds.

He has cut a political and legal swathe through New Zealand since he landed in 2010, including forcing an apology from Prime Minister John Key for the illegal surveillance of Dotcom by a government spy agency.

Dotcom is also behind the fledgling Internet political party, which is planning to contest a general election in September.

(Editing by Dean Yates)

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