Jan. 23, 2012 at 4:02 AM ET
The founder of file-sharing website Megaupload was ordered to be held in custody by a New Zealand court Monday, as he denied charges of Internet piracy and money laundering. Two other suspects were also arrested in Europe.
Prosecutor Anne Toohey argued at a bail hearing that Kim Dotcom, a German national also known as Kim Schmitz, was a flight risk "at the extreme end of the scale" because it was believed he had access to funds, had multiple identities and had a history of fleeing criminal charges.
"The FBI believes the sums located are unlikely to represent all the overseas bank accounts owned by Mr. Dotcom," she said.
Toohey told the court that when police detained Dotcom there was an open safe about four yards away from him containing a firearm, Radio New Zealand reported. The safe's keys were in the lock.
But Dotcom's lawyer said he posed no threat of absconding or restarting his businesses, arguing that his client had cooperated fully, his passports had been seized and his funds frozen, and also that he had a distinctive appearance.
"He is not the sort of person who will pass unnoticed through our customs and immigration lines and controls," defense lawyer Paul Davison said of the former hacker, who is reportedly 6ft 6ins and 285 lbs.
Davison also said Dotcom wants to stay in New Zealand because his wife and children were there, Radio New Zealand said.
Judge David McNaughton said the bail application was too complicated for an immediate ruling, adding he would issue a written decision no later than Wednesday.
U.S. authorities want to extradite Dotcom on charges he masterminded a scheme that made more than $175 million in a few short years by copying and distributing music, movies and other copyrighted content without authorization. Megaupload's lawyer has said the company simply offered online storage.
FileSonic halts file-sharing
Prosecutor Toohey said two other men sought for involvement in Megaupload had been arrested in Europe. U.S. authorities had earlier issued international warrants for Sven Echternach, 39, a German, and Andrus Nomm, 32, of Estonia.
The shockwaves of the case appeared to be spreading among rival websites offering lucrative file-sharing. FileSonic, a website providing online data storage, said in a statement on its website that it had halted its file-sharing services.
"All sharing functionality of FileSonic is now disabled. Our service can only be used to upload and retrieve files that you have uploaded personally," it said.
Dotcom, 38, and three others, were arrested Friday after New Zealand police raided his country estate at the request of the U.S. Federal Bureau of Investigation. Police cut Dotcom out of a safe room he had barricaded himself in, because, according to his lawyer, he was frightened and panicked.
Presenting the case for flight risk, the prosecutor said 45 credit cards in three wallets were found in the mansion under Dotcom's various names, while three passports were also found. But his defense lawyer said: "My client collects them (credit cards), most of them are out of date."
Dotcom smiled and waved at around 20 supporters who filled the courtroom and spoke to them after the judge's decision.
"Hey guys thanks for turning up, I appreciate it," he said, wishing a female supporter a "happy birthday."
Defense lawyer Davison said Dotcom was "realistic about what is happening."
"He would obviously prefer to be at large. He doesn't want to be there any longer than he absolutely has to be," he told reporters outside the court.
Media reported that Dotcom ordered around NZ$4 million ($3.2 million) of renovations to the sprawling mansion that he leased near Auckland, with its manicured lawns, fountains, pools, palm-lined paths and extensive security.
The case is being heard as the debate over online piracy reaches fever pitch in Washington, where Congress is trying to craft tougher legislation.
Piracy laws debated
Lawmakers stopped anti-piracy legislation on Friday, postponing a critical vote in a victory for Internet companies that staged a mass online protest against the fast-moving bills.
The movie and music industries want Congress to crack down on Internet piracy and content theft, but major Internet companies such as Google and Facebook have complained that current drafts of the legislation would lead to censorship.
Critics of the U.S. Stop Online Piracy Act, or SOPA, and Protect IP Act (PIPA), quickly showed their opposition to the shutdown of Megaupload.com, with hackers attacking the public websites of the Justice Department, the world's largest music company Universal Music, and the two big trade groups that represent the music and film industries.
Dotcom's New Zealand lawyer Davison said in court that Megaupload's business was being misrepresented and authorities were being aggressive to add drama to the case.
"His business did not reproduce or copy material as alleged," he told the court, adding that copyright holders had been given access to Megaupload to identify improper posting of material. He likened the site to the popular YouTube video site, where people "promoted their creativity."
In New Zealand, questions are being asked about how Dotcom, who moved to the country in 2010, could be given permanent residency under a business investor scheme despite criminal convictions for insider trading.
A legal expert said extradition arrangements between New Zealand and the United States were reasonably straightforward and standard, but there were some important factors.
"The offence for which extradition is sought must be an offence in the jurisdictions of both states," said Otago University law professor Kevin Dawkins, adding that an accused must be tried on the offence for which they are extradited.
'Fast cars, hot girls, superyachts'
New details emerged about Dotcom's lavish lifestyle and tastes, with reports that he had a heated lap pool built just off the master ensuite, with underwater speakers, and imported spring water.
"It's insane, and it gets more insane inside. When we were there we called it 'extreme home makeover, millionaire edition'," a source close to the teams that did renovation work told the New Zealand Herald.
A film posted on the Internet shows Dotcom, surrounded by topless women and men spraying champagne on board a superyacht during a "crazy weekend" in Monaco reported to have cost $10 million.
"Fast cars, hot girls, superyachts and amazing parties. Decadence rules," said the commentary accompanying the so-called fun documentary, which Dotcom dedicated to "all my fans."
The FBI estimates that Dotcom personally made around $115,000 a day during 2010 from his empire. The list of property to be seized, includes nearly 20 luxury cars, one of them a pink Cadillac, works of art, and NZ$10 million invested in local finance companies.
Reuters and msnbc.com staff contributed to this report.