September last year the Digital Citizens Alliance and NetNames released a report that looked into the business models of “shadowy” file-storage sites.
Titled “Behind The Cyberlocker Door: A Report How Shadowy Cyberlockers Use Credit Card Companies to Make Millions,” the report offers insight into the money streams that end up at these alleged pirate sites.
The research claims that the sites in question are mostly used for copyright infringement. But while there are indeed many shadowy hosting services, many were surprised to see the Kim Dotcom-founded Mega.co.nz on there.
For entertainment industry groups the report offered an opportunity to put pressure on Visa and MasterCard. In doing so they received support from U.S. Senator Patrick Leahy, who was also the lead sponsor of the defunct controversial Protect IP Act (PIPA).
Senator Leahy wrote a letter to the credit card companies claiming that the sites mentioned in the report have “no legitimate purpose or activity,” hoping they would cut their connections to the mentioned sites.
Visa and MasterCard took these concerns to heart and pressed PayPal to cut off its services to Mega, which eventually happened late last month. Interestingly, PayPal cited Mega’s end-to-end-encryption as one of the key problems, as that would make it harder to see what files users store.
The PayPal ban has been a huge blow for Mega, both reputation-wise and financially. And the realization that the controversial NetNames report is one of the main facilitators of the problems is all the more frustrating.
TorrentFreak spoke with CEO Graham Gaylard, who previously characterized the report as “grossly untrue and highly defamatory,” to discuss whether Mega still intends to take steps against the UK-based NetNames for their accusations.
Initially, taking legal action against NetNames for defamation was difficult, as UK law requires the complaining party to show economic damage. However, after the PayPal ban this shouldn’t be hard to do.
Gaylard is traveling through Europe at the moment and he notes that possible repercussions against the damaging report are high on the agenda.
“Yes, I am here to see Mega’s London-based legal counsel to discuss the next steps in progressing the NetNames’ response,” Gaylard informs TF.
Mega’s CEO couldn’t release any details on a possible defamation lawsuit, but he stressed that his company will fiercely defend itself against smear campaigns.
“Mega has been operating, and continues to operate a completely legitimate and transparent business. Unfortunately now, with the blatant, obvious, political pressure and industry lobbying against Mega, Mega needs to defend itself and will now cease taking a passive stance,” Gaylard says.
According to the CEO Mega is running a perfectly legal business. The allegation that it’s a piracy haven is completely fabricated. Like any other storage provider, there is copyrighted content on Mega’s servers, but that’s a tiny fraction of the total stored.
To illustrate this, Gaylard mentions that they only receive a few hundred takedown notices per month. In addition, he notes more than 99.7% of the 18 million files that are uploaded per day are smaller than 20MB in size, not enough to share a movie or TV-show.
These statistics are certainly not the hallmark of a service with “no legitimate purpose or activity,” as was claimed.
While the PayPal ban is a major setback, Mega is still doing well in terms of growth. They have 15 million registered customers across 200 countries, and hundreds of thousands of new users join every month.
Tag: Digital Citizens Alliance
Mississippi Attorney General Jim Hood Demands $2,100 To Reveal The Emails He’s Had With The MPAA
As you may know, we’ve been covering the story of Mississippi Attorney General Jim Hood and his campaign against Google. A few years ago, we noted how bizarre it was that Hood and other state Attorneys General seemed to be blaming Google for all kinds of bad things online. It seemed to show a fundamental lack of understanding about how the internet (and the law!) worked. Of course, things became somewhat more “understandable” when emails leaked in the Sony Hack revealed that the MPAA had an entire “Project Goliath” designed around attacking Google, and the centerpiece of it was funding Jim Hood’s investigation into Google, including handling most of the lawyering, writing up Hood’s letters to Google and even the “civil investigative demand” (CID — basically a subpoena) that he could send.
Hood lashed out angrily about all of this, even as the NY Times revealed that the metadata on the letter he sent Google showed that it was really written by top MPAA lawyers. Hood continued to angrily lash out, demonstrating how little he seemed to understand about the internet. He made claims that were simply untrue — including pretending that Google would take users to Silk Road, the dark market hidden site that could never be found via a Google search. Hood also dared reporters to find any evidence of funding from Hollywood, and it didn’t take us long to find direct campaign contributions to his PAC from the MPAA and others.
Given all of this, we filed a Mississippi Public Records request with his office, seeking his email communications with the MPAA, its top lawyers and with the Digital Citizens Alliance, an MPAA front-group that has released highly questionable studies on “piracy” and just so happened to have hired Hood’s close friend Mike Moore to lobby Hood in Mississippi. Moore was the Mississippi Attorney General before Hood and helped Hood get into politics.
We’ve had to go back and forth with Hood’s office a few times. First, his office noted that Google had actually filed a similar request, and wanted to know if we were working for Google in making the request. We had no idea Google made such a request and certainly were not working on behalf of Google in making our request — but Hood’s office helpfully forwarded us Google’s request, which was actually a hell of a lot more detailed and comprehensive than our own. This actually is helpful in pointing to some other areas of interest to explore.
However, after some more back and forth, Hood’s office first said that it would refuse to share the emails between Hood and the MPAA’s lawyers as they “constitute attorney-client communications” or “attorney work product” and that finding the rest of the emails would… require an upfront payment of $2,103.10
Paypal Cuts Off Mega Because It Actually Keeps Your Files Secret
The world could really need a credible alternative to PayPal
There are way too many stories of Paypal unfairly and ridiculously cutting off services that rely on it as a payment mechanism, but here’s yet another one. Mega, the cloud storage provider that is perhaps well-known for being Kim Dotcom’s “comeback” act after the US government shut down Megaupload, has had its Paypal account cut off. The company claims that Paypal was pressured by Visa and Mastercard to cut it off:
Visa and MasterCard then pressured PayPal to cease providing payment services to MEGA.
MEGA provided extensive statistics and other evidence showing that MEGA’s business is legitimate and legally compliant. After discussions that appeared to satisfy PayPal’s queries, MEGA authorised PayPal to share that material with Visa and MasterCard. Eventually PayPal made a non-negotiable decision to immediately terminate services to MEGA. PayPal has apologised for this situation and confirmed that MEGA management are upstanding and acting in good faith. PayPal acknowledged that the business is legitimate, but advised that a key concern was that MEGA has a unique model with its end-to-end encryption which leads to “unknowability of what is on the platform”.
MEGA has demonstrated that it is as compliant with its legal obligations as USA cloud storage services operated by Google, Microsoft, Apple, Dropbox, Box, Spideroak etc, but PayPal has advised that MEGA’s “unique encryption model” presents an insurmountable difficulty.