Kim Dotcom, a.k.a. Kim Tim Jim Vestor, a.k.a. Kim Schmitz, doesn’t act much like a man with a net worth in the negative.
At 11 a.m. on a Tuesday he’s driving me around on a golf cart “safari” of his 60-acre estate outside of Auckland, New Zealand. He weaves among a grove of olive trees with alarming speed–he’s removed the speed regulator in his fleet of electric buggies, and they can clock up to 19 miles per hour. We swing past his 2,000-bottle-a-year vineyard and barrel down a hill toward his $30 million mansion, complete with a hedge maze, a five-flatscreen Xbox room and a 75-foot cascading water display.
Given that he owes millions of dollars to defense lawyers and now has to raise his five children on a $20,000-a-month government allowance meted out from his frozen bank accounts, wouldn’t it be wise to live a slightly simpler life?
“No way,” he says, leaning his massive 6-foot-7, 300-plus-pound body onto the cart’s steering wheel. “That would be allowing them to get away with this stunt. I won’t accept that. By staying here I’m saying, ‘Eff you! You can’t defeat me!’”
The “stunt” Dotcom refers to is the police helicopter raid on his compound that made global headlines 15 months ago, timed to coincide with the U.S. indictment that shut down his ultrapopular constellation of Mega-branded websites under charges of hosting half a billion dollars’ worth of pirated movies and music. Overnight Dotcom went from an underground entrepreneur to one of the most public and controversial figures on the Internet. His site domains, including the flagship Megaupload.com, are now the property of the U.S. government. His servers have been ripped out of data centers around the world and sit in evidence warehouses. He’s had to let go of 44 of his 52 house staff as well as Megaupload’s hundreds of employees. All but 2 of his 18 cars have been seized or sold.
But today Kim Dotcom is putting all of that in his souped-up golf cart’s rearview mirror. His new storage startup, called simply Mega, launched Jan. 20, defiantly a year to the day after the sudden destruction of Megaupload. It’s already exploded to exceed 3 million registered users. His engineers tell me it’s moving 52 gigabits of data per second–that’s nearly half the entire bandwidth of New Zealand–and growing at 30% a week. The traffic has been driven in part by Dotcom’s own larger-than-life persona: an Internet mogul who doubles as either an intellectual-property-stealing supervillain or an oppressed freedom fighter, depending on whom you ask.
Either way, Dotcom has learned from his legal misadventures and promises that the copyright cabal will find this company much harder to snuff. Mega is “the Privacy Company.” Unlike Megaupload, everything sent to Mega is encrypted. No one can decrypt those scrambled files except the user–not the FBI, not the Motion Picture Association of America, not even Kim Dotcom. Mega claims to keep the eyes of both authorities and snoops off its users’ files, a libertarian ideal that fits neatly into Dotcom’s personal narrative as a victim of the U.S. government’s overreach into the digital world. “Mega is not just a company,” he says. “It’s a mission to encrypt the Internet. We want to give the power back to the user.”
The revenge Dotcom is planning, he says, will be twofold: Not only will his new, better company be immune from his enemies, but he has also hired a team of 28 global lawyers who he believes will make the U.S. government pay for treating the Internet as a subjugated colony.
He powers his golf cart up a steep hill to a peak overlooking his estate, with life-size giraffe sculptures in the distance and MEGA spelled out in 15-foot-tall white letters laid out next to his winding driveway.
“This is a low point,” Dotcom says quietly. But his sulking doesn’t last long. “I’m going to be bigger than ever.”
***
IN 2009 A STUDY by traffic-research firm Arbor Networks and the University of Michigan found that a little-known collection of sites was responsible for a gargantuan amount of the Internet’s data–their hosting firm was using twice as much bandwidth as Facebook. The sites, including Megaupload and Megavideo, seemed to have been registered in 2005 to one Kim Schmitz, a German ex-hacker and ex-con. But a spokesperson at Megavideo told FORBES at the time that no person by that name was associated with the company.
“Technically that was correct,” says Megaupload’s 39-year-old founder years later. In 2005 Kim Schmitz had legally changed his name to Kim Dotcom, and he saw no need to reveal his new identity to a nosy reporter. “Back then I kept a low profile.”
Kim Dotcom may have been publicity shy, but Kim Schmitz had already been in plenty of headlines. Growing up in the northern German city of Kiel, the teenage Schmitz had been a notorious figure on the early Internet underground. Before the advent of the Web, Schmitz ran a bulletin board service called “House of Coolness” that users remember as a hub for trading videogames with cracked copy protections and stolen calling cards. (Today Dotcom so vehemently denies that the service hosted substantial copyright-infringing material that he threatened legal action to prevent us from publishing this story.)
Learning from the hackers who inhabited his forum, Schmitz developed a knack for breaking into corporate telephone switches known as PBXs to hijack modems that could be used for free Internet connections. Using the nom de guerre Kimble, he bragged to FORBES in 1992 that he had compromised more than 500 of the systems. Schmitz was soon busted by German police for a scheme that earned him $50,000 by funneling hacked PBX traffic to a paid bulletin board service he’d set up in Hong Kong.
After two years of probation Schmitz leveraged his hacker reputation into a security business that he later sold to the German technical conglomerate TUV Rheinland. He rose to prominence as a flashy dotcom investor, throwing lavish parties, renting yachts and winning a round-trip cross-continent road rally from London to St. Petersburg in his custom Mercedes Brabus. But in 2002 Dotcom was hit with insider trading charges over his role in a Groupon-like company called Letsbuyit and pled guilty. With his reputation tattered in Germany, he fled to Hong Kong and changed his name to Kim Tim Jim Vestor, swapping first names on a whim.
Kim’s new scheme, and the one that would become the most lucrative of his career, arose from a simple problem on the pre-YouTube Internet. There was no easy way to attach video files to e-mail, such as clips of his road rallies. So he, his old hacker friend Matthias Ortmann and Bram Van Der Kolk, a fan from his racing days, created Megaupload as a no-frills data storage and video service. The Hong Kong-based company started popping up on racing forums and soon was doubling in user adoption on a yearly basis. The 34-year-old hacker from Kiel changed his name a final time to reflect his new digital ambitions: Kim Dotcom.
Dotcom describes those Hong Kong years as “the best time of my life.” He began renting the top floor of the Hong Kong Grand Hyatt and made frequent trips to the Philippines, where he recruited offshore staff and met his wife, ex-model Mona Verga. Soon, he says, he employed 12 people in Hong Kong, 90 in the Philippines and dozens more in Germany, Mexico, Brazil, Britain and Portugal.
As Megaupload grew, an ecosystem of illegal services began to form around it like remoras around a whale. Sites like Surfthechannel, Quicksilverscreen and FilesTube began to catalog entire seasons of copyrighted TV shows, pirated music and movies on Megaupload. Dotcom says he was careful to abide by the U.S.’ digital copyright act (called the DMCA), which required that his sites take down infringing content after it’s pointed out by the content’s owner. But the files often reappeared within days–in 2009 FORBES tracked one film, District 9, that was uploaded to Megavideo more than 127 times and removed 89 times.
Still, Dotcom’s sites were used for legal file storage and sharing, too. Users included employees from 70 of the world’s 100 biggest companies, by Dotcom’s reckoning, and he was confident that his business was sheltered within the DMCA’s safe harbor, which puts the onus on the copyright holder, not services like Megaupload. At worst he expected a copyright lawsuit like the one Viacom launched against Google over YouTube, which Google won in 2010. (Viacom won an appeal and the case is now back in litigation.)
By 2011 Megaupload had become an Internet behemoth, pushing 1.5 terabits per second of bandwidth at peak times. According to the Department of Justice, the company generated $175 million in sales over its lifetime, mostly from premium accounts (the feds say Dotcom personally pocketed $42 million in 2010). The site had 150 million registered users, and Dotcom planned a public offering he expected to give it a valuation of more than $2 billion. With his 65% stake in the company he would be a billionaire.
Then, a day before his 38th birthday, the U.S. government took it all away.
www.kim.com
Video from March 2012
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