Silk Road Similarities: Court Gives Kim Dotcom 'Some' Funds Access (Op-Ed)

Kim Dotcom, the superstar entrepreneur and labeled by Wired as the “Internet's most wanted man” (before Snowden), has been allowed to regain a decent portion of his war chest, from funds seized by the New Zealand government.

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Silk Road Similarities: Court Gives Kim Dotcom 'Some' Funds Access (Op-Ed)

Kim Dotcom, the superstar entrepreneur and labeled by Wired as the “Internet's most wanted man” (before Snowden), has been allowed to regain a decent portion of his war chest, from funds seized by the New Zealand government.

The entrepreneur behind the controversial file sharing empire MegaUpload has been fighting an expensive legal battle against the US government in the New Zealand courts, after the US raided Dotcom's NZ mansion on counts of racketeering, conspiring to commit copyright infringement, and conspiring to commit money laundering.

Early during 2012, the USA aided by the NZ police department raided Kim Dotcom's mansion and seized around US$17 million worth of assets using warrants now deemed illegal by High Court Judge of New Zealand Justice Helen Winkelmann.

On top of the assets seized during the USA/NZ raid, which included sports vehicles and paintings, Dotcom allegedly had over 64 bank accounts frozen around the world, including multiple PayPal accounts which totaling US$175 million.

The catch 22 is that without access to his fortune, Dotcom faces a great challenge funding his legal defense and has already spent over US$10 million since the raid in 2012, much of which he still owes or has funded through new enterprises since.

This raises criticisms of the “justice” system and concerns about his capacity and opportunity for a fair trial, given the massive amount of funding that the USA and special interest groups such as the Motion Picture Association of America – a lobby group – can allocate to pursuing charges against him.

NZ allows Dotcom some of ‘his’ money

In February a “broke” and “destitute” Dotcom appeared before Justice Patricia Courtney, asking for living expenses and a massive cash injection to pay historical and current legal fees. Dotcom was previously granted around US$15,000 per month to live on but high costs had left him “penniless”.

Dotcom regained access to between US$1.5 and US$3 million as reported by torrentfreak. The judge noted that Dotcom still owes around US$1.5 million to former lawyers and will need a hefty stash of coin to finance his legal battle against extradition. This amount will be released from currently restrained government bonds.

The judge also allowed Dotcom to get a monthly allowance from the seized funds which according to her should enable the entrepreneur to keep maintaining his large family and honor his lease contract on that massive mansion we saw raided earlier.

Dotcom admits moving to a more humble home after the contract is due in 2016 might be a sensible choice.

Kim Dotcom

Dotcom vs. powerful media lobby

News of Dotcom's small re-entry into the financial system and some of his fortune being returned to him got some buzz on the Bitcoin subreddit. What does this case have to do with Bitcoin, some ask? Well, there are plenty of reasons, including charges and tactics somewhat similar to the Silk Road case.

For example, Dotcom is being charged with copyright infringement on the grounds that he enabled and conspired to support piracy. However, the entrepreneur maintains that MegaUpload was first and foremost a cloud storage company that served businesses and individuals who uploaded all kinds of content, not just that deemed illegal by US courts.

This means that as a software developing company, he and his team are being charged for the actions of the users of their platform, very much analogous to the case against Ross Ulbricht.

Another relevant reason is the seizure of Dotcom's funds by freezing his bank accounts worldwide including PayPal accounts. This, regardless of where you stand on intellectual property rights, shows how fragile our 'ownership' over funds stored on the banking system is. It also reveals how vulnerable the legacy financial system is to political manipulation.

After all, international copyright and patent law is often pushed by wealthy lobby groups composed of old media giants such as Hollywood, Sony, Disney, Warner Brother among others who appear to be threatened by the Internet's core function, the infinite sharing of information.

Last but not least, any well versed Bitcoiner might be tempted to day dream about what kind of private key security scheme might have allowed them to keep some significant portion of your riches, had you been in Dotcom's shoes.

For example, how about a brain wallet to an address where say 5% of profits went, and which was reasonably hidden from the public? Or a multisig address of say 4 of 6, where all parties were unknown to each other, and only Dotcom knew who they were? The same 5% could be allocated to such an account secretly, and if he held his tongue, could be accessed after the raid.

Here's a more interesting one. What if he placed the same secret 5% in the hands of multiple lawyers through multisig, who were paid some custodial fee, a kind of legal insurance?

Such security, particularly if kept secret rather than in the loud and open books of the legacy banking system, might have offered enough of a challenge to the mighty US government. Or maybe not.

Ultimately, the biggest challenge with using Bitcoin in such a high profile scenario and with such a vast amount of wealth (5% of $175 million is a whole lot of money) is really liquidity. Converting all that Bitcoin to USD or vice versa might have been a real challenge, particularly since Dotcom would have been compelled to use a Bitcoin exchange connected to the banking system to do so.

Unless of course he accepted Bitcoin directly for his products or as donations, and kept it.

Does Mega really accept Bitcoin?, the rebirth of his cloud storage and file sharing company, has already been politically attacked by the financial system to the tune of closing its PayPal and Visa accounts. Why? Well, because they are highly centralized of course (This is why PayPal does not get a song).

Mega claims to encrypt all data client side before uploading it to its servers and claims not to have a copy key with which it is encrypted, a model familiar to the Bitcoin community. This model is rather problematic for payment providers who likely fear a lawsuit from the copyright lobby on the grounds of some kind of ‘conspiracy to infringe upon copyright.’

Dotcom buzzed among Bitcoiners in early 2013 when he announced Mega services could be purchased with Bitcoin through a reseller. Fast forward a year, and I could not find a way to upgrade my Mega account with the cryptocurrency. So if the option is available, it sure is well hidden. 


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