Court told Dotcom case is 'simple fraud'

After three and a half years, Kim Dotcom has faced court in New Zealand facing charges of copyright violation, racketeering, and money laundering, as well as potential extradition to the United States.

After three and a half years of legal battles, including 10 postponements and two Supreme Court hearings, internet tycoon Kim Dotcom finally faced Auckland District Court this week.

Dotcom's profiteering from copyright piracy is a simple case of fraud, and he knew authorities would come for him eventually, a lawyer told the court on Thursday.

Opening the case for US authorities, Christine Gordon QC said the crime was nowhere near as unusual as Dotcom's lawyers had made out.

"When distractions are stripped away, the evidence boils down to a simple scheme of fraud," she said. "[They] were part of a conspiracy, they deliberately attracted copyright infringing material to their websites, deliberately preserved that material, deliberately took steps to profit from that material, and made vast sums of money, which they then put to purpose knowing that money had been unlawfully acquired."

Gordon said Megaupload deliberately hid away copyright infringing material on the site and encouraged users to make multiple links to each illegal file to make them more difficult to take down. The website had an innocent-looking front to cover the real sources of its profits and actually rewarded repeat copyright infringers, rather than banning them from the site, she added.

Dubbed the "Mega conspiracy" by the FBI, US authorities allege Dotcom and his associates Mathias Ortmann, Finn Batato, and Bram van der Kolk, illegally made over AU$250 million from the file storage site and related businesses.

Gordon said another person arrested over the same "conspiracy" had already pleaded guilty in the US and a judge there had deemed the case to be enough for a conviction. If extradited and found guilty in the US, the four face charges that carry decades of jail time.

In late 2011, the Megaupload site was one of the top 100 websites in the world. By early 2012, US authorities had shut the site down and arrested its proprietors.

Seven people were charged at the time with racketeering, copyright infringement, and money laundering, with several of the charges involving conspiracy. The maximum sentences ranged from five to 20 years each.

Ruling Judge Nevin Dawson now has to decide whether they should be surrendered to face charges in the US.

"At some point a judge will be convinced how evil we are ... We have to make ourselves invulnerable," Dotcom was quoted telling one of his co-accused in the first day of FBI evidence presented in court.

"If copyright holders would really know how big our business is, they would surely do something against it. They have no idea we are making millions in profit every month," Bram van der Kolk was quoted as saying.

Dotcom has been facing extradition to the United States since 2012, following accusations from the FBI of copyright violation, racketeering, and money laundering. Since then, Dotcom has fought a ferocious legal and extralegal campaign to avoid extradition.

Throughout the three and a half year wait for Dotcom, it was discussed that his foundation charge, copyright violation, was not a criminal offence in New Zealand, and under that proviso, it had previously been said he could not be extradited to the US for that, highlighting the other two charges built on top needed to be sustained.

In 2012, the New Zealand government apologised to Dotcom for illegally spying on him.

Whilst embroiled in the legal battle, Dotcom started up cloud storage firm Mega in 2013, which he then stepped back from to fight the extradition charges and to bankroll the Internet Party, which failed to gain a seat in parliament during last year's New Zealand general election.

In July, Mega -- which claims it has more than 18 million registered users -- updated its constitution, making it easier for the company to list after a failed attempt to join the New Zealand Stock Exchange (NZX) through a back-door listing earlier this year.

Dotcom found himself in the spotlight again in July after Mega hit back at claims by him that the company is in the hands of a wanted Chinese investor whose shares have been seized, and is wanted for fraud by the New Zealand government.

"As a result of this and a number of other confidential issues, I don't trust Mega anymore," Dotcom said at the time. "I don't think your data is safe on Mega anymore."

In response, Mega said that it had 13 percent of its shareholdings subject to two freezing orders. A 6 percent holding controlled by Dotcom's estranged wife was frozen in November 2014 by the New Zealand High Court on application by five Hollywood film studios, and, in a separate matter, a 7 percent shareholding was frozen by the High Court in August 2014.

With AAP