Megaupload Tells Court That DOJ Deliberately Misled Court In Getting Warrant

from the more-problems dept

Lawyers for Megaupload have filed a motion with the court handling the US side of the prosecution against the company, arguing that the original warrants were defective due to blatant misrepresentations by the government. As you may recall, in the case involving Kyle Goodwin, a Megaupload user who is trying to get his data back, he had to ask the court to unseal the warrant the DOJ used to seize Megaupload because the government had kept it secret. While the Justice Department went ballistic trying to prevent this unsealing, the judge allowed it to happen. And it didn't take long to figure out why the DOJ preferred to keep it private because among a bunch of problems, was the big one: a key bit of evidence that the DOJ used against Megaupload to prove that it had "knowledge" of illegal activity on its servers existed because the government -- via service provider Carpathia -- had explicitly told Megaupload to hold onto certain data since it was a part of a criminal investigation.

As Megaupload points out in this filing, it's particularly ridiculous that Megaupload was told to hold onto certain information as part of a criminal investigation -- to which it complied -- and then that very fact is being used against it, because it didn't delete the info. And, of course, the DOJ didn't explain the context in getting the warrant.

This Court recently ordered the unsealing of the documents previously submitted by the United States to support taking down the Megaupload cloud storage site by seizing the domain name(s) --- such unsealing lays bare a crucial omission the Government made to the Court in the secret process.  Specifically, the Government’s affidavits underpinning the warrants omitted critical, exculpatory information regarding whether, why and how Megaupload knew it was hosting criminally infringing files.  The Government represented that, “[o]n or about June 24, 2010, members of the Mega Conspiracy were informed, pursuant to a criminal search warrant from the U.S. District Court for the Eastern District of Virginia, that thirty-nine infringing copies of copyrighted motion pictures were present on their leased servers at Carpathia Hosting, a hosting company headquartered in the Eastern District of Virginia,” and that, “[a]s of November 18, 2011, thirty-six of the thirty-nine infringing copies of copyrighted motion pictures were still being stored on servers controlled by the Mega Conspiracy,” after it was informed of the infringing content.... This snippet—which appears in each relevant affidavit and is the only direct, corroborated evidence the Government purports to offer as proof that Megaupload had requisite knowledge—suggests that Megaupload was warned of its potentially criminal complicity yet persisted in hosting the files without concern for their illegal content.  The affidavits, in short, paint Megaupload as a brazen scofflaw.
The truth, as the Government well knows, is quite different.  Megaupload had every reason to retain those files in good faith because the Government had sought and obtained Megaupload’s cooperation in retrieving the files and warned that alerting users to the existence of the warrant and the Government’s interest in the files could compromise the investigation.  Carpathia informed Megaupload that the warrant was sealed, and that only Carpathia and Megaupload, not the users of the infringing files, were to know of its existence, and at the Government’s request provided Megaupload a copy of the sealing order. The Government selectively parsed its account so as to exclude critical facts that negate any notion that Megaupload had criminal mens rea to retain the infringing files.  The Government deliberately neglected to apprise the Court that:

•       Megaupload received the June 24, 2010 warrant in the course of cooperating with a Government investigation; 
•       Megaupload was informed of the June 24, 2010 warrant by its vendor, Carpathia Hosting (“Carpathia”), with the Government’s consent and for the express purpose of obtaining Megaupload’s voluntary assistance with executing the warrant;
•       The Government declined to communicate directly with Megaupload about the warrant, instead deputizing Carpathia to communicate on its behalf;
• Carpathia directed Megaupload not to open “EM7 tickets” on the infringing files—which would have alerted a larger number of people to the existence of the warrant and jeopardized the secrecy of the investigation—“[b]ecause of the Government’s seal on the warrant,” asking that Megaupload instead deal directly with a single person at Carpathia;
• Megaupload’s preservation of the status quo, particularly by not taking down or otherwise disturbing the files identified in the June 24, 2010 warrant, was faithful to the Government’s express desire, reflected by the Magistrate Judge’s order sealing the warrant (provided to Megaupload by Carpathia at the Government’s request) and by Carpathia’s instructions on the Government’s behalf, for Megaupload to ensure that evidence would remain preserved and that the target users would remain unaware of the investigation; and
• Consistent with its stated desire that the warrant and investigation remain confidential so as not to tip off the target users, the Government—neither directly nor through Carpathia—ever requested that Megaupload take down the files identified in the June 24, 2010 warrant.

Megaupload is now arguing that the warrant and the seizure itself were defective and need to be overturned based on the fact that they were completely misleading on this bit evidence. In fact, the government specifically appears to have instructed Carpathia to tell Megaupload (1) to retain the files in question and (2) that Megaupload was not the subject of the investigation:

Nowhere did the Government tell this Court that its June 24, 2010 warrant had been calculated to enlist good-faith cooperation with a criminal investigation, while preserving the secrecy thereof. Nowhere did the Government tell this Court that the Government had sought Megaupload's voluntary assistance in executing the warrant. Nowhere did the Government tell this Court that Carpathia had assured Megaupload, in the interests of its requested cooperation, that there was no basis to believe that Megaupload was a target. Nowhere did the Government tell this Court that Megaupload had in fact cooperated precisely as requested. Most importantly and most troublingly, nowhere did the Government tell this Court that Megaupload had been informed by Carpathia, acting on behalf of the Government and heeding the Government's insistence upon sealing, that the secrecy of the warrant and the Government's investigation must be preserved to avoid destruction of evidence and notification of the targeted users. Nor did the Government inform this Court that the sealing order it had obtained and furnished Carpathia to provide to Megaupload likewise required secrecy and expressly specified that [redacted ]. In sum, nowhere did the Government tell this Court that Megaupload had done exactly what the Government had asked it to do--execute a search warrant without alerting the ostensible targets to the existence of an investigation. The Government's contention to this Court that Megaupload's preservation of the status quo was evidence of criminal intent is false, and deliberately so.

Attached is an exhibit in which Carpathia explicitly says it told the DOJ that Megaupload was happy to cooperate with the US government on such investigations.

Given its responses so far, I fully expect the government to go ballistic over this filing as well, but with each filing, their case looks weaker and weaker. As we've said in the past, it really does seem like DOJ agents were taken in by Hollywood's story about how Megaupload was pure evil and that was obvious to anyone -- and, as such, the DOJ could take various shortcuts in bringing the site and Kim Dotcom down. To be honest, what's still incredible to me about all of this is that, prior to the takedown, I probably would have agreed that Megaupload was likely a "bad player" in the space and that Dotcom had a reputation of thumbing his nose at the law. But as more and more details have become clear, it's looking more and more like the DOJ cut corners so badly that it's entire case may be at risk. If true, this will be a massive embarrassment for anyone at the DOJ associated with the case.