Interview: Mega coders split from Kim Dotcom, built a castle in the cloud

“You don’t abandon your own child to raise someone else’s child,” says super-coder Mathias Ortmann, of Megaupload fame.

He’s talking about Mega, the successor to the infamous Megaupload website brought down by the FBI in 2012. As summer that year approached, he and fellow coder Bram van der Kolk built a new cloud storage site from scratch, launching it on the anniversary of the raid.

Eighteen months later, Kim Dotcom was selling out of Mega and had a new plan. He wanted the coders to leave the new company and follow his entrepreneurial urges.

Ortmann: “We basically felt a connection to Mega that was strong and is strong to this day. And we simply did not feel like abandoning it.

“We would rather stop talking to Kim Dotcom.”

That was 2014. Ortmann, van der Kolk and Dotcom have shared many courtrooms since but haven’t shared a single word.

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The three, along with Megaupload’s marketing manager Finn Batato, were arrested here in January 2012.

The FBI indictment accused them, and three others in Europe, of massive copyright infringement through Megaupload. It was a giant of a site, boasting of consuming 4 per cent of the world’s internet bandwidth. It had 180 million registered users and claimed to be the 14th most visited site on the internet.

Kim Dotcom was its public face but, when it came to the engine room, the code that built and ran the website came from van der Kolk, chief programmer, and Ortmann, chief technical officer.

It’s a site that could land them decades in a US jail, yet they speak of it with a mix of affection, enthusiasm and pride. They also don’t see it as a criminal enterprise.

“Megaupload was a pioneer,” says Ortmann. “It came at a time when bandwidth pricing had just dropped by a factor of 10.”

Initially created to allow car enthusiasts to share photographs and videos, it launched the same month as YouTube and was among a cluster of sites Ortmann calls “the league of pioneers”. Plummeting bandwidth costs pushed early entrants into what he calls “unknown territory, both technologically and legally”.

The site went from car videos to everything else users could upload. Dotcom worked out how to monetise the site with member accounts and selling advertising, and by 2010 there were fortunes coming in.

As Megaupload expanded in size and turnover, its staff numbers grew to more than 200 people. In 2010, the year the money really started flowing, Dotcom earned US$42 million, Ortmann US$9m and van der Kolk US$2m.

Van der Kolk, who now lives in a modest semi-detached home in Auckland’s Mt Roskill, talks of the cashflow – all seized in the extradition case – as “very unusual”. “Kim Dotcom … had an immense, amazing lifestyle. He could almost live like a billionaire out of the profits of the company while he was still operating it.”

Ortmann: “I think it’s correct to say that Dotcom was presiding over Megaupload with an iron fist. He was absolutely calling the shots with regards to policy decisions. There was no way that anyone else in the company would influence his course.

“What he wanted would happen, with very few exceptions. There was no way to call for moderation and expect to be heard in any way, shape or form.”

The company’s lawyers assured Megaupload it was legally compliant in civil and criminal spheres. Ortmann: “Bram and I would have quit immediately had we feared or had reason to believe that anything that Megaupload was doing was criminal.

“There was simply no notion whatsoever that anything that Megaupload was doing could possibly have been criminal. We would have never for a minute stayed with a company that was doing something criminal.”

For the coders, “it’s not about the money so much” but building something, improving it, working with other big brains.

“It’s the fun of the game, not so much the high score at the end.”

Dropping the bomb

As Megaupload developed, there was less fun in the game. They accrued experience and ideas but had no time and, they say, insufficient money, to develop Megaupload.

By the time it was closed down, Ortmann describes Megaupload as “woefully inadequate from a technical perspective”. Upgrading it to cope with demand would have been like “replacing a [Charles] Lindbergh plane and upgrading to an A380, while it was flying”.

And then came the raid, the destruction of Megaupload, and the shock that went with it. Ortmann’s instinctive logical assessment was in disarray – the world had tilted and what was occurring didn’t fit with the available facts.

“The [US] Government dropped a nuclear bomb on Megaupload,” he says. “The level of aggression and the level of extremism in both the indictment and the execution of the raid clearly indicated that this was not an ordinary criminal case.

“They definitely wanted to signal to the world that a new approach to copyright enforcement was being worked on.”

Raids carried out simultaneously in seven countries saw bank accounts frozen and assets seized. The other three wanted Megaupload staff slipped the dragnet, although one has since cut a plea deal and served a year in jail in the US.

It scraped clean much of the past eight years – akin, says van der Kolk, to watching strangers pack away your life after dying.

It took a month before all four were bailed, with Ortmann moving into van der Kolk’s home where, in September 2012, a path to the future emerged.

That month the two coders sat down, back to back in a side room at van der Kolk’s, and began writing what became Mega.

Ortmann: “We started thinking about how we can benefit from our experience. How can we do it right? This new start we realised would be a significant opportunity.” The anniversary of the raid – January 20, 2013 – was planned as the launch of the new cloud storage service.

“It was a very tight deadline,” says Ortmann. “So we worked day and night, slept as little as possible and put our ideas into code.”

And Dotcom? As someone who built a reputation in the early 1990s as a hacking maestro – how did he contribute?

Ortmann: “Kim Dotcom was a great abstract motivator. He called regularly and asked, ‘are you making good progress?’. He invited us over to the mansion and gave us excellent food. And, um, that was his role.”

Van der Kolk expands: “He did really well on the PR front. He arranged funding, which is essential. You do need to buy servers. You cannot do everything with code.”

And, they agreed, Dotcom arranged the legal advice. On bail, facing down the US Government and – by then – an array of powerful copyright holders filing civil suits, they knew their new business would be “under the microscope”.

They met the deadline. The site was launched and, when it went live, creaked under the weight of interest brought by a global public relations offensive.

After the gloss of the launch came the work. As van der Kolk notes, when start-ups get big, they attract interest. Mega was small and under scrutiny from the start.

That showed in a US senator’s aggressive lobbying regarding the new company, and in the loss of a few, then all, payment providers. That included credit card companies, then PayPal, until they were running a cloud storage business that was attracting customers but had no way to get money from them.

Investors stuck with Mega, funding ever-growing server space and business costs, even as Dotcom sold down and then out of the company. He had his eye on a new business and wanted the coders to come with him. And there was his political ambition.

That was the parting of the ways.

Breaking the ties

There was no big bust-up between the Megaupload accused. In many ways, Megaupload held them together and when it went, so did many of the ties that bind.

Dotcom was two years into fighting the extradition case when he set his sights on Parliament, launching the Internet Party.

“We’re technologists, not politicians,” says Ortmann. Van der Kolk adds: “It became too much of a circus basically, and it’s not productive.”

Ortmann: “We decided to not go into politics and stay with the company and so we kind of had no more common basis or common interests.

“It’s been very healthy actually to have that distance and just to be able to focus on value creation,” says van der Kolk, “and not this puffs …”, as he mimes clouds of air constantly huffing upwards. He uses the German word “fremdscham” to describe it. It means “vicarious embarrassment”.

The separation doesn’t quite speak to Dotcom’s dominating and forceful nature. His is a powerful personality, offset by a sense of humour that is usually challenging and inappropriate.

During the 10-week extradition hearing in 2015, Dotcom sent van der Kolk a copy of the Liam Neeson movie Taken 2 for his birthday. The joke: there is an entire count in the FBI indictment devoted to van der Kolk uploading the movie to his Megaupload account.

Yet Ortmann and van der Kolk keep in touch with Batato – the fourth Megaupload accused in New Zealand – who is widely regarded as “the nice guy”.

Ortmann: “Kim Dotcom is a nice guy, too. Just a different kind of nice. He is a more difficult kind of nice than Finn.”

Van der Kolk: “He’s [Dotcom] very strong minded and if you’re not willing to go the way he wants things to go, there’s no way to work with him. And he will do everything in his ability to make you go with him.”

And then he adds: “Kim Dotcom cares about Kim Dotcom.”

At Mega, development continued without Dotcom. Ortmann and van der Kolk speak of operating with the knowledge the US wanted them in jail, and knowing the company was under a microscope.

“Our lawyers actually warned us that we would go straight to prison if we opened a new cloud storage service,” says van der Kolk.

It has flourished, growing its million users in 2012 to 35 million by January 2016 and now around 210 million. It offers end-to-end encryption, 50GB of free storage, gets increasingly positive reviews in international press and is about to expand its offering. It does so with about 100 staff, of whom 60 are based in New Zealand, with the remainder in Spain.

For a company founded on the code written by Ortmann and van der Kolk, the constant presence of the extradition case hovers over the company.

“It is an interesting psychological conundrum,” says Ortmann. “It is not easy to be productive and future-focused in circumstances where the future may not actually be a very long-term one.”

Van der Kolk: “It’s not just uncertainty for us. Normally as founders, if you want to drive a … company forward, you have got to have a vision and a future.

“And when all your staff knows that you’re under attack and, at the same time, you want to inspire and motivate them and build a future with them … how do you do that?”

'Fugitives from justice'

The court case has seen 40,500 hours of New Zealand taxpayer-funded legal effort poured into getting four men to the United States, or resolving issues connected to the extradition.

Once there, court rulings declaring they are “fugitives from justice” – on the basis that they resisted extradition – likely mean remand until trial. If convicted, they face decades in prison.

Van der Kolk and Ortmann have attended every hearing throughout the court process. For different reasons, Batato and Dotcom don’t always get there. The coders, though, soak up the process.

In doing so, they describe what they have come to call “Planet Megaupload”. It describes a reality in which they (and co-accused) exist, extant of all civilisation, in a novel criminal copyright bust that hasn’t been repeated, followed by an extradition fight unmatched in New Zealand history.

The most recent development was the Supreme Court finding that the required standard for extradition had been met, albeit with a diversion back to the Court of Appeal on an argument that should have been heard years ago.

The push to go to the Court of Appeal – possibly adding a year to the case – came only from Dotcom and the US. The coders? They said: Let’s get on with it.

“It’s dragged on long enough,” says Ortmann. “You would have never expected the legal process to move at such a glacial pace.”

Not that their hopes rest with the courts. The argument over guilt or innocence is not for New Zealand courts. The job here is to find whether there is a case to answer – and if so, to answer it in the US.

“Even if you have good arguments,” says van der Kolk, “a court by design cannot inquire into it that much. You can be extradited and innocent.”

Elements of the case are highly technical and require a specialised knowledge that they say hasn’t been found in the courts. A low point was a question from the bench in the District Court. “Cow storage?” asked a judge, puzzling over a term he had heard in evidence. “Cloud storage,” Dotcom repeated.

Van der Kolk talks of hitting the highs and lows of an emotional rollercoaster, with court hearings and the decisions that follow, with evidence held back because of the limitations of the law or just misunderstood because of a lack of technical competence.

Ortmann simply speaks of frustration over reasoning he considers “not rational”. “There are excellent, excellent legal minds, but are they technologists?”

It’s the next phase where the coders have hope. It’s when Minister of Justice Kris Faafoi has to choose whether to sign the extradition warrant, after obtaining evidence from all sides, and briefings from a specialist Ministry of Justice team. Having weighed arguments, it is his decision to then sign the extradition warrant – or not.

At that point, it is expected that the Minister’s decision would be challenged through judicial review, sending it back to the High Court, and then to appeal.

“It will surely be over in 10 years,” says Ortmann. “It might not be over in five years.”

They always expected there would be a civil case. Hotfile and Rapid Share were comparable companies: the former settled a civil suit from the Motion Picture Association of America for $4m in 2011; RapidShare changed its offering after Megaupload was taken down, dwindling in appeal and closing in 2015.

Here in New Zealand there would be no jail for the Megaupload accused. In the United States, copyright allegations are compounded by organised crime charges – or typical business finance and meetings, in their view – and the prospect of decades in prison.

Ultimately, as Van der Kolk says, it could lead to “the destruction of our lives”.

“Even the last 10 years, actually, is a punishment. It’s a punishment in the process, right? Who needs to live under this type of sword of Damocles for such an immense amount of time?

“It’s become such a big part of our life. We just cannot give up.”

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