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Canadian court refuses to let Feds snoop on Megaupload servers

Canuck tells FBI to back off the big fella

By Kieren McCarthy, 3 Apr 2017

A Canadian appeals court has told the FBI it's not allowed to review servers from file-sharing service Megaupload held north of the border.

"In my view, it is offensive to the appearance of fairness, and specifically the appearance of judicial impartiality, to have an entity closely associated with one of the adversaries provide the judge with the necessary report," the decision from the Ontario Court of Appeal reads.

The decision is the latest in a lengthy legal battle between US authorities and Megaupload head Kim Dotcom taking place in three different countries: the United States, Canada and New Zealand.

It started in 2012 when over 1,000 servers based in the US were seized as part of a huge investigation into the company for what authorities are certain was profiting from copyright infringement: Megaupload lets users download unlimited movies and music for a monthly fee.

As well as those servers, the company had another 32 based in Canada and, according to records that it seized, the FBI suspects they may be crucial to proving the case against Megaupload. The Canadian servers were "database/number crunching machines" – whereas the US servers are thought to have simply hosted material.

Always get our man. Now if you want him...

However, despite the Mounties seizing and impounding the servers more than five years ago, the Feds have still been unable to review their contents because of a determined legal fightback put up by Megaupload's lawyers.

The servers – held in an Equinix data center in Toronto – were grabbed in January 2012. A year later, the Canadian Minister of Justice had had enough of legal delays and ordered the servers be sent to the United States.

But, crucially, the courts agreed – thanks to Megaupload arguing that they contained a lot of irrelevant material – that they could be reviewed by an independent expert before being sent on.

That legal battle stretched out until in 2015, when the court decided that a separate FBI team from those pursuing the case should be allowed to search the servers and remove irrelevant material.

Unsurprisingly, Megaupload's legal team appealed that decision and late Friday the appeals court sided with Dotcom.

The decision is not a hugely surprising one: the FBI is locked into what the judge noted was a "strongly adversarial position" with Megaupload. As such, allowing FBI agents to determined what is irrelevant or not to the case is not exactly guaranteeing impartiality.

Whoever does end up reviewing the servers will produce a report that the judge is then expected to act on. That report, the appeals court noted, would "significantly influence" the judge's decision over what to order handed over to the FBI. As such, the FBI can't be involved at all, he decided.

Although he did note he was not impugning the FBI, just that he was concerned about the "appearance of fairness and impartiality."

And the other battles?

And so it looks as though the Canadian arm of the case against Dotcom and Megaupload is going to drag on for another few years.

Meanwhile, on the other side of the globe in New Zealand, Kim Dotcom is still fighting efforts by the authorities to get him shipped to the United States to face charges.

Dotcom was famously collared by the New Zealand police in a helicopter raid on his mansion in 2012. Since then he has been fighting the effort to extradite him and has been so successful that the New Zealand authorities have a second "plan B" approach to getting him out the country in case the first one fails.

Megaupload's lawyers fought every aspect of New Zealand's extradiction law and, it turns out, the rarely used laws had a few loopholes. Back in 2015, Dotcom increased his notoriety with extravagant appearances in court while his lawyers argued that copyright infringement was not an extraditable offence. He lost (government lawyers argue he is being extradited on fraud claims), and promptly appealed.

In February this year, following yet more legal hearings, another judge threw out that appeal – and Dotcom immediately said he would appeal that decision too. The case seems headed to the New Zealand Supreme Court.

This has all been going on for so long that earlier this month, a documentary about Dotcom, Megaupload and its legal battles was released.

In the meantime, Dotcom has done his best to stay in the limelight and profit from his notoriety. He is current on bail but has released a music album, launched a watered-down – and legal – version of his file-sharing business called Mega, and just this week put out a demo for a new payments platform using bitcoin called Bitcache.

Where does all the money come from to pay for high-end lawyers in three different countries? According the US Justice Department, Megaupload made at least $175m in profit while it was up and running. You have to wonder how much of that Kim Dotcom has access to, and how much of it is left. ®

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