Inside the Lavish Life of Megaupload Founder, Dotcom

BY WALL STREET JOURNAL

Auckland, TAG – Kim Schmitz legally changed his surname to Dotcom at some point over the last decade, a homage to the technology that made him a millionaire and that has now landed him in a New Zealand jail.

The 38-year-old Internet entrepreneur was arrested Thursday at his birthday celebration inside a 25,000-square-foot mansion in Auckland. When police entered the property, Mr. Dotcom fled to a safe room, where he was found with a loaded shotgun, officials said.

Mr. Dotcom was charged with criminal copyright infringement and conspiracy to commit racketeering. The Federal Bureau of Investigation shut down his Hong Kong-based website, which it claims was used to pirate half a billion dollars worth of entertainment content.

The husky Mr. Dotcom is a kingpin in a little-exposed side of the Internet economy, who profited by tapping changes in technology, roiling the entertainment industry.

His company, Megaupload Ltd., and similar online storage sites known as cyberlockers, have many legitimate uses, such as allowing people to share large presentation files and home movies.

But U.S. authorities and entertainment executives say in court documents and interviews that cyberlockers are at the vanguard of online piracy. On Friday, the U.S. Congress abandoned two controversial antipiracy bills.

Despite the legal controversy brewing around his website—and a previous conviction for insider trading—Mr. Dotcom didn't lay low or hide anonymously behind his computer.

Rather, Mr. Dotcom openly enjoyed a lavish lifestyle. He owned at least 18 luxury cars—including a 1959 pink Cadillac and three cars with vanity license plates that read "HACKER," "MAFIA," and "STONED," according to U.S. officials—flew helicopters, and personally funded the city of Auckland's 2010 New Year's fireworks celebration.

He also raced cars in the Gumball 3000 Rally, a Cannonball Run-like global competition on public roads in locations that change every year. In at least one Gumball race, Mr. Dotcom was videotaped driving a black Mercedes sedan in which he zipped past a police officer. Referring to his nickname, Mr. Dotcom smiled into the camera, saying, "Dr. Evil is always getting away with it."

While operating Megaupload, Mr. Dotcom both fought with Hollywood and embraced its celebrity, last year convincing several rappers, actors and musicians to record a promotional video for his site.

Before the site was taken down by authorities on Thursday, Megaupload also listed as its CEO hip-hop super-producer Swizz Beatz, also known as Kasseem Dean and the husband of singer Alicia Keys. 

A spokeswoman for Swizz Beatz on Friday confirmed her client had been named CEO, but added: "We're trying to clarify" whether the appointment actually went into effect.

Mr. Dotcom couldn't be reached for comment on Friday in Auckland, where he appeared at the North Shore District Court for a bail hearing and awaits extradition to the U.S. His local lawyer, Paul Davison, didn't return a call seeking comment.

In the U.S., Megaupload's case was taken up on Thursday by Washington, D.C., lawyer Robert S. Bennett, known for representing President Bill Clinton when he was accused of sexual harassment by Paula Jones. "We will vigorously defend against the charges," Mr. Bennett said.

Mr. Dotcom has boasted about his past. In an autobiographical piece he penned for the blog TorrentFreak.com in December, he wrote, "Find me a Wikipedia profile of a person that is worse than mine and I will buy you dinner." He shared photos of himself carrying a rifle and standing in front of a luxury car with a license plate that reads "GUILTY."

He continued: "I made mistakes when I was young and I paid the price. Steve Jobs was a hacker and Martha Stuart [sic] is doing well after her insider trading case." He said he was married with "three adorable children with two more on the way."

German by birth, Mr. Dotcom first came to prominence in Berlin for his computer hacking skills, according to Andreas Bogk, a hacker and member of the Chaos Computer Club. Mr. Bogk said he didn't know Mr. Dotcom personally, but that Mr. Dotcom was on the scene in the 1990s.

At the time, Mr. Dotcom set up a software-hacker community and a computer system used to upload pirated software from others, Mr. Bogk said. Mr. Dotcom charged people for access to the system and the pirated software, which was mostly games, Mr. Bogk adds.

Mr. Dotcom then went on a German television news show and exposed the scheme, which led the telephone monopoly at the time to shut it down, said Mr. Bogk.

Munich-based photographer Peter Schinzler, who shot photos of Mr. Dotcom once in the late 1990s, describes him as a "funny guy." Part of the shoot involved a high-speed car chase into the mountains, in which Mr. Dotcom swerved into oncoming traffic and went off road. "We didn't drive into the mountains, we flew," Mr. Schinzler said.

In 2001, Mr. Dotcom got in legal trouble when he offered to rescue an ailing online shopping club, Letsbuyit.com NV. He promised to invest $50 million in the company, which boosted the stock—but then he sold his shares after investing little more than $1 million.

As a result, he was found guilty of insider trading in 2002 after being extradited from Thailand to Germany, according to a spokeswoman for the court. He was given a suspended prison sentence and fined, according to press reports.

This aerial shot shows Kim Dotcom's house in Coatesville, north west of Auckland, New Zealand.    

Mr. Dotcom later started a new life in Hong Kong, where he was the mastermind behind Megaupload, among other businesses.

It's not clear when or how Mr. Dotcom came to befriend hip-hop stars like Mr. Dean, known as Swizz Beatz. But the musician thought he could persuade Mr. Dotcom to transform Megaupload into a legitimate, licensed music service, according to a person familiar with the matter.

While Megaupload was based in Hong Kong, Mr. Dotcom lived in New Zealand. There, he was arrested at his sprawling property, worth some $24 million, situated in Auckland's outskirts.

The home, with a sign in front that reads "Dotcom Mansion" and a large giraffe and rhinoceros sculpture, also has an extensive security system including three gates, manned security guards and security cameras, said New Zealand Police detective inspector Grant Wormald.[]

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