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Appeals Court Sides With Federal Government in Seizure of Megaupload Assets

Tens of millions of dollars in funds held in foreign banks by Kim Dotcom and others responsible for Megaupload will remain frozen after a federal appellate court rejected claims that U.S. courts lacked jurisdiction over the property.

The 4th Circuit Court of Appeals, in a 2-1 ruling, upheld a district court’s default judgment against Dotcom and Megaupload, which led to forfeiture orders for assets in New Zealand and Hong Kong.

Dotcom is fighting extradition from New Zealand after Megaupload was shut down and his Auckland home was raided in 2012, in what authorities characterized as massive copyright infringement of movies, TV shows, and music. A grand jury returned an indictment for criminal copyright infringement and money laundering “with estimated harm to copyright holders well in excess” of $500 million, and income in excess of $175 million.

Courts in Hong Kong and New Zealand issued restraining orders on about $75 million in Megaupload assets, although New Zealand courts have released millions in legal fees for Dotcom and $170,000 per month in living expenses. As extradition hearings have dragged on, U.S. authorities sought to restrict the money flow, and a federal district court granted a default judgment and issued forfeiture orders for the assets in March of 2015.

The appellate judges rejected claims that federal courts lack jurisdiction, noting that the alleged “Mega Conspiracy was a file-sharing scheme in which copyrighted files were illegally transferred to users around the world through the servers located in Ashburn, Virginia.” The opinion was written by Judge Roger Gregory.

In a dissent, Judge Henry Franklin Floyd wrote that because the frozen assets were in the control of foreign governments, the district court could not issue an order that would be “binding against the world.”

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