July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Presumption of innocence is a fundamental component of law in many nations, including Canada, France, Russia, and even, yes, the Islamic Republic of Iran. It is not however, enshrined in the Constitution of the United States of America, although it’s often believed to follow from amendments 5, 6, and 14.

Not so much at U.S. District Court in New York, however.

“I believe that the government will be able to show at trial direct evidence that Apple knowingly participated in and facilitated a conspiracy to raise prices of e-books, and that the circumstantial evidence in this case, including the terms of the agreements, will confirm that,” U.S. District Judge Denise Cote said on Thursday.

The trial features the U.S. v. Apple on a Department of Justice charge that Apple conspired to price-fix ebooks, limited ebook competition, and break Amazon’s hold on the market. And it’s an interesting example of a monopoly-style case being brought against a company with a tiny fraction of the ebook market (Apple), mostly to the benefit of a company with a massive wedge of the ebook market (Amazon).

Apple comprehensively denies the charges.

“Apple has not ‘conspired’ with anyone, was not aware of any alleged ‘conspiracy’ by others, and never fixed prices,” the company stated in a reply to the suit last year.

Tell it to the judge, I guess.

That’s precisely what Apple is attempting to do, but statements like the above must be more than a little worrisome for Apple legal representatives. Perhaps just as worrisome is that Judge Cote has already begun writing a draft of her decision — before the trial has begun.

Evidence has already been submitted to the court, however, and that — apparently — is enough for Cote to form an opinion on the case.

One of those pieces of evidence was a line in an email from then Apple CEO Steve Jobs to News Corp. CEO Rupert Murdoch, whose company owns the publisher HarperCollins. The line that the DOJ released was fairly damning, on the face of it:

Throw in with Apple and see if we can all make a go of this to create a real mainstream ebooks market at $12.99 and $14.99.

That certainly looks like it could be price-fixing, right?

But here’s the line in the full context of Steve Jobs’ email:

Our proposal does set the upper limit for ebook retail pricing based on the hardcover price of each book. The reason we are doing this is that, with our experience selling a lot of content online, we simply don’t think the ebook market can be successful with pricing higher than $12.99 or $14.99. Heck, Amazon is selling these books at $9.99, and who knows, maybe they are right and we will fail even at $12.99. But we’re willing to try at the prices we’ve proposed. We are not willing to try at higher prices because we are pretty sure we’ll all fail.

As I see it, HC has the following choices:

1. Throw in with Apple and see if we can all make a go of this to create a real mainstream ebooks market at $12.99 and $14.99.

2. Keep going with Amazon at $9.99. You will make a bit more money in the short term, but in the medium term Amazon will tell you they will be paying you 70% of $9.99. They have shareholders too.

3. Hold back your books from Amazon. Without a way for customers to buy your ebooks, they will steal them. This will be the start of piracy and once started there will be no stopping it. Trust me, I’ve seen this happen with my own eyes.

Maybe I’m missing something, but I don’t see any other alternatives. Do you?

In that context, Job’s sentence appears to be simply an option that HarperCollins has. And it looks a lot less damning.

It’s not clear what other evidence Judge Cote has seen. And it’s not clear if she’s trying to urge the parties involved to come to a pre-trial settlement by pressuring Apple to make nice and roll over for the DOJ.

But let’s hope she maintains some level of objectivity in the case she’s judging — and that she at least waits until the case is heard in a court of law before making public statements about whether she believe the defendant is guilty or not.

photo credit: kalavinka via photopin cc

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Federal regulators are investigating claims that Microsoft employees accepted bribes from foreign government officials in exchange for software contracts.

The Wall Street Journal reported that the initial allegations came from an anonymous source, who told U.S. regulators that an executive of Microsoft’s China subsidiary told him to offer kickbacks to Chinese officials. Rumors also claim that resellers offered bribes to secure software deals with Romania’s Ministry of Communications and that people in Microsoft’s Italy unit used special consultants to give gifts and trips to Italian officials in exchange for government business.

Microsoft is a huge international corporation, with offices in more than 100 countries and more than 90,000 full-time employees as well as 640,000 business partners. The company said that more than 170 of its employees are responsible for investigating, auditing, and monitoring to ensure that business operations meet legal and ethical standards.

“Like every large company with operations around the world we sometimes receive allegations about potential misconduct by employees or business partners,” said John Frank, Microsoft’s vice president and deputy general counsel, to the Wall Street Journal. “We take all allegations seriously and investigate ether fully regardless of the source.”

The investigation is now in the preliminary phase. It is being conducted under the Foreign Corrupt Practices Act that prohibits U.S. companies from paying bribes to foreign officials. Furthermore, the SEC established a program in 2010 that offers cash incentives to whistleblowers.

Many corporations will investigate themselves for potential violations in an effort to avoid or lessen penalties for corruption. According to the Journal, Microsoft actually waged a 10-month internal investigation about the allegations in China that concluded in 2010 and found no evidence of wrong-doing.

The Justice Department and the Securities and Exchange Commission have declined to comment, but so far no charges have been filed. Read Microsoft’s statement.

Tomorrow, he’s likely going to jail.

“It’s a fucking ludicrous charge,” Auernheimer told me this morning from New Jersey. “The FBI has tried to frame me for terrorism five times, and by their own admission they’ve been surveilling me since I was 15 years old.”

Update: Auernheimer was sentenced to 3 years in jail and $73,000 in fines

But tomorrow he expects to go to jail. In preparation, he and supporters have rented a 10,000 square foot hall where they’ll party the night away in perhaps his last taste of freedom for 10 years.

If he does go to jail, it’ll be the latest chapter in a long list of federal prosecutions of computer “crimes” by hackers who are forcing mainstream society to reconsider what freedom of speech means online, what is an appropriate response to a corporation’s poor security, and what kinds of access constitute crimes. That list includes Aaron Swartz, who committed suicide after what many have said was DOJ misconduct.

The story starts with a boneheaded AT&T decision.

During the summer of 2010, Auernheimer and co-defendant Danile Spitler discovered that by querying AT&T’s iPad servers with a string of numbers that matched subscribers’ SIM card identifiers, AT&T’s servers would send back the unencrypted, unprotected email address of the AT&T customer, the iPad owner. AT&T had a massive security design flaw, which, as it admitted in Auernheimer’s one-week trial, was intentional: for subscriber convenience. After running the script to capture 114,000 email addresses of AT&T iPad subscribers, Auernheimer sent a list of the email addresses to Gawker to highlight the security hole. Gawker then printed them in redacted form.

“If you buy an Apple product, you have a right to know that Apple partners could compromise your privacy,” Auernheimer told me, explaining why he sent the email addresses. “And that they take six months to patch security issues.”

So there’s obviously a security issue. And there’s obviously a privacy issue. But where’s the crime?

“We sent Get requests to a public API,” Auernheimer says. “They charged me with unauthorized access to a computerized device … and identity theft, which is a possession charge … if you walk down a street and write down physical addresses, you’re stealing identifiers, and you’re an identify thief.”

If sending Get requests is a crime, we are all criminals.

You could be charged with unauthorized access to a computerized device, for instance, simply because you clicked on the link that brought you to this article. Oh, and Google, one of the most successful corporations in the world, is the root of all evil. A Get request is simply a note from a browser computer code asking for a resource. You issue thousands of them every day all by yourself. Google issues billions.

Whether the receiving server responds to that request in any way, shape, or form is entirely at the discretion of the developers and system administrators who control that server.

The CFAA does not define the phrase “unauthorized access,” so according to Auernheimer, the government essentially told the jury that his access to the server was unauthorized because they said it was. Which, if true, means that whether you commit a legal act or an illegal act is at the discretion of anyone who runs a webserver, who can change their mind at any time without you knowing.

Good luck following the straight and narrow.

After a one-week trial, a jury found Auernheimer guilty on November 20 after just a few hours of debate. Auernheimer told me that his friend overheard “vicious arguing and screaming” in the jury room, so there was some serious debate, but there was a potential reason to be fast, and maybe even hasty.

“The trial was right before Thanksgiving … I think people wanted to get the hell out of there and get to Thanksgiving,” Auernheimer said.

Tonight he’s awaiting sentencing, which could be up to 10 years in jail and up to $500,000 in fines. And he’s not too hopeful that the judge will go easy on him.

“I’m probably going to prison, and they may take me into custody immediately,” Auernheimer told me. “But I have an excellent chance on appeal … any sane examination of the CFAA at this point is going to realize that it criminalizes all web access.”

The Electronic Frontier Foundation has already agreed to help him with that appeal.

Anonymous, spurred by the suicide of coder and activist Aaron Swartz, reportedly hacked into the Department of Justice’s computer systems and stole what it is calling “multiple warheads.” That is, a number of files that the U.S. government wouldn’t want revealed.

Swartz committed suicide earlier in January while facing a up to 35 years in prison and a $1 million fine for siphoning off nearly five million JSTOR articles through the Massachusetts Institute of Technology’s network. He had a total of 13 felony charges against him. Anonymous is calling for a change in the justice system and says situations like Swartz’s promote “outdated and poorly-envisioned legislation, written to be so broadly applied as to make a felony crime out of violation of terms of service, creating in effect vast swathes of crimes, and allowing for selective punishment.”

The group claims it has a number of files that it hopes not to have to use and hacked into the Department of Justice’s United States Sentencing Commission overnight to announce the grab. Anonymous says it will not ruin the speculation by saying what the documents hold, but it will release redacted sections to reporters who provide a secure means of communication, starting as early as today.

“Suffice it to say, everyone has secrets, and some things are not meant to be public,” the group said in its statement.

Anonymous also pointed out recent reports of Red October, cyber-spying malware that targeted a number of governments around the world, particularly in Eastern Asia. It also mentioned the recent outcries around a major vulnerability in Java, saying:

“None of this comes of course as any surprise to us, but it is perhaps good that those within the information security industry are making the extent of these threats more widely understood. Still there is nothing quite as educational as a well-conducted demonstration.”

This is perhaps a hint that Anonymous used the Java exploit to enter the DoJ’s systems. It might also just mean the group is showing off its own hacking prowess — well, if it provides anything to substantiate the supposed lifted files.

via Gawker; Anonymous mask via Shutterstock

Mikael Sallnert, a Swedish businessman, was sentenced to four years in jail today for aiding a scareware scam that raked in around $71 million by tricking people into downloading bogus anti-virus software.

The U.S. Department of Justice and the FBI arrested Sallnert in Denmark nearly a year ago, after discovering the scareware scam. A statement from the DOJ says that around 960,000 people fell victim to the fraudulent software offer. The scareware used pop ups when a person visited a website to offer free virus scans of their computer. Once the victim accepted the offer, the scareware would lie and say there were a variety of trojans and other malware on the system. Then it would push its fake clean-up software, which would cost victims up to $129.

Sallnert would then push these credit card payments through the correct channels to get the money to the criminals.

“As an established businessman, this defendant put a stamp of legitimacy on cyber criminals,” said U.S. attorney Jenny A. Durkan in a statement. “He was involved in defrauding thousands of victims, and his actions contributed to insecurities in e-commerce that stifle the development of legitimate enterprises and increase the costs of e-commerce for everyone.”

Sallnert will also have to forfeit $650,000 — likely the amount he took from the scam.

hat tip The Verge, Jail image via Shutterstock

The blooming bromance between hirsute Apple co-founder Steve Wozniak and Kiwi bad boy Kim Dotcom is getting more serious by the day.

Dotcom, for those of you unfamiliar, is the founder of the now-shuttered Hong Kong-based  file-hosting service Megaupload, which the US Department of Justice shut down in January. The self-proclaimed victim of that high-profile police raid and seizure, which also landed him a month in jail, is facing not only extradition to the US but charges of money laundering and racketeering as well.

Wozniak isn’t fond of the situation. “It’s just kind of ridiculous what they did to his life,” he told the Associated Press.

For Woz, the case against Dotcom and Megaupload is a weak one. After all, plenty of people used the service entirely legally before it was shut down, he points out.

As a founder of the Electronic Frontier Foundation, Wozniak says he’s intent on helping Megaupload’s users get their legitimate and legal files back from the US government, which aims to destroy the data.

“You don’t just shut down the whole street because somebody is speeding,” he told the AP.

Fortunately, Woz also recognizes the very real possibility that Dotcom, for all his smooth talk and charm, is pulling wool over his eyes. ”If I hear details that have credibility, I could totally turn against him,” he said, noting that little of what he’s seen has given him any reason to do that.

But Wozniak isn’t the only one who’s joined the Cult of Kim. Days after starting a personal Twitter account, Dotcom has accrued over 40,000 followers. Clearly, the man is an empathetic character to a lot of people.

Image: Shutterstock

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

It took a while, but the U.S. Department of Justice is finally acknowledging that big cable companies may have the power to suffocate online video service, which people turn to as an alternative to paying an expensive monthly cable TV subscription.

The DOJ is conducting a wide-ranging antitrust investigation of big cable companies that provide both cable television and broadband Internet service, reports the Wall Street Journal. The report indicates that the Justice Department has started questioning cable companies like Comcast and Time Warner, as well as officials at streaming video services like Netflix and Hulu.

The Justice Department is specifically interested in a few key practices, such as the need for data caps (which restricts the amount of data a subscriber can download/upload in a month), throttling a subscriber’s Internet connection speed, and requiring authentication (meaning proof that you subscribe to cable TV) to gain full access to content on other streaming video services (Hulu, in particular).

Basically, companies like Comcast are now starting to branch out their existing TV services to the web to prevent people from cancelling their subscriptions. Comcast’s Xfinity TV service is essentially an OnDemand video library available on regular cable set-top boxes, desktop web browsers, smartphones, and tablets — nearly identical to services like Netflix. And when the company started promoting its Xfinity TV Xbox App last month as not counting against a data cap, it sparked a public debate.

Critics, such as Netflix chief executive Reed Hastings, point out that imposing data caps on streaming video services gives cable companies an unfair advantage. For example, one argument is that people will end up using the cable company’s service over competitors like Netflix because they won’t have to pay more money for going over the data cap. Comcast, in particular, said its Xfinity TV service is delivered over a “private” network, and thus isn’t subject to the same data accrued from web usage. But since both cable TV and Internet data use the same broadband infrastructure, this argument is questionable at best.

The DOJ’s interest in whether cable companies are unfairly quashing competition from streaming video services is probably also related to another antitrust investigation — Verizon’s pending deal to purchase a portion of wireless spectrum from SpectrumCo.

Last year Verizon agreed to spend $3.6 billion to obtain a portion of spectrum currently owned by SpectrumCo, a joint venture that consists of Comcast, Time Warner Cable Inc., Bright House Networks, and Cox Communications. In exchange, Verizon will begin marketing broadband Internet/TV service from those cable companies, despite the fact that its FiOS broadband business is a direct competitor. So basically, Verizon wants to ditch its broadband business, which means less competition in the cable market (and one fewer choice for consumers).

While we don’t know the full details of the DOJ’s current investigation, the results could force cable companies to change the way they do business.

Photo via GoodLIfe_Studio /Shutterstock

Experts are saying Apple is likely to emerge victorious from a Department of Justice case regarding price fixing on e-books.

Apple was accused of conspiring to fix and raise prices on e-books along with five major publishers. The DOJ has been investigating the issue since last year and officially filed its lawsuit yesterday. The entire filing is included below, and since its filing, sixteen U.S. states have joined the suit.

Last year, Apple switched its pricing structure with publishers to an agency model, allowing those publishers to set their own prices on e-books while giving Apple a standard cut of the revenue. However, the deal also stipulates that e-books sold through the iTunes store cannot be sold at a lower price anywhere else on the Internet.

A cadre of law professors has explained to Cnet reporters that precedents for the DOJ’s case may actually give Apple the upper hand.

In fact, a few of the J.D.s think the DOJ has a better case against the publishers than against Apple. Precedents include a 1982 case pitting the DOJ against IBM (the case was abandoned as being “without merit”) and the DOJ’s 2001 attempt to split up Microsoft à la the disassembling of the Ma Bell conglomerate.

“If the CEOs of the various publishers got together in hotel rooms to discuss prices, they are sunk,” said antitrust author and University of Hartford professor emeritus Dominick Armentano. As far as e-book economics are concerned, the DOJ would have a much easier time proving the publishers’ antitrust behavior and wrongdoing than Apple’s.

However, this doesn’t mean Apple is guaranteed a win in court. “I’m not saying that Apple can smile and walk away from this,” said Notre Dame law prof Joseph Bauer. “It’s just that the government will have to show that Apple had some kind of involvement in the original arrangement.”

Image courtesy of NADIIA IEROKHINA, Shutterstock

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

The world’s most valuable company, Apple, is being accused of conspiring with five major book publishers to raise the price of e-books, which could lead to a lawsuit from the U.S. Department of Justice.

The antitrust case deals with Apple’s “agency model” of selling apps and e-books in which the publisher sets its own prices for their products while giving Apple 30 percent of every sale. Yet, Apple placed a stipulation on the book publishers that they cannot sell an e-book title for a lower cost than what’s available through Apple’s iTunes bookstore, according to a Wall Street Journal report that cites unnamed sources familiar with the matter.

The outcome of the DOJ lawsuit threats could mean cheaper prices on e-books for consumers from the publishers involved. It could also mean lower revenues for publishers, which includes Simon & Schuster, Hachette Book Group; Penguin Group, Macmillan, GmbH, and HarperCollins Publishers.

The DOJ has been investigating e-book pricing since last year. If the news is true, the antitrust lawsuit warning would mean that the DOJ was unable to reach an agreement with both Apple and the publishers on a solution. However, it’s likely that all parties involved will reach a settlement because taking the case to court would be far more expensive and give the companies a dose of negative PR.

Tablet image via Shutterstock

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Google’s planned acquisition of Motorola Mobility has just officially passed muster in the European Union.

Regulators had put the deal on hold in both the U.S. and EU pending investigation for possible antitrust issues.

“We’re happy that today the European Commission approved our proposed acquisition of Motorola Mobility, which we announced in August,” wrote Google VP and deputy general counsel Don Harrison today on the company blog.

“This is an important milestone in the approval process and it moves us closer to closing the deal. We are now just waiting for decisions from a few other jurisdictions before we can close this transaction.”

The proposed deal put a $12.5 billion price tag on the Motorola property. Motorola also introduced a hefty $2.5 billion breakup fee, showing that company’s concern that the deal might not get through federal regulators.

Officials with the U.S. Department of Justice and other international governing bodies were initially given pause by Google claims that, even after the acquisition was complete, Motorola would not be given unfair advantages, such as early access to the Android codebase, over other Android handset and tablet manufacturers.

EU regulators halted the acquisition process in December 2011 when officials asked for more time to conduct a thorough review of the deal.

However, Google has proven — at least to EU officials — that it is in the company’s best interest to carefully skirt any antitrust activities in order to maintain the peace in the Android ecosystem while gathering the legal stockpile of patents necessary to protect Android manufacturers from the myriad lawsuits in which many are currently embroiled.

“The combination of Google and Motorola Mobility will help supercharge Android,” said Harrison in conclusion. “It will also enhance competition and offer consumers faster innovation, greater choice and wonderful user experiences.”

Rumors are swirling that the Justice Department may approve the acquisition as soon as this week, but for now, those rumors have yet to be confirmed.

Image courtesy of laihui

Anonymous bullhorn @YourAnonNews is claiming that the hacktivist group has taken down the Central Intelligence Agency‘s website.

“CIA TANGO DOWN: https://www.cia.gov/ #Anonymous,” a person behind @YourAnonNews tweeted.

The attack took place roughly around 12:10 p.m. Pacific time on Friday, and the website is still down an hour later.

Anonymous traditionally has “F*ck FBI Friday,” in which it attempts to take down or release information about the Federal Bureau of Investigation. Last week, the group released a phone call regarding Anonymous that took place between the FBI and Scotland Yard.

The group recently took down the US Department of Justice website as well as a number of a record label websites in response to the shutdown of file sharing website MegaUpload. Low-orbit-ion-cannons (LOIC) were used to issue denial of service attacks to the many websites it was targeting at the time. Denial of service attacks send multiple data requests to a website in the hopes of overloading its servers, resulting in the website becoming inaccessible. These requests are also called “packets,” thousands of which can be quickly sent using LOIC.

Anonymous was also accused of providing links on Twitter, which would install LOIC on any computer that clicked the link. These links helped Anonymous recruit innocent bystanders to their cause, launching denial of service attacks from any of the computers that accessed the link.

A similar attack may have been used to take down the CIA website, although it doesn’t look like the group distributed any of the same links that helped take down the DOJ.

hat tip RT

Anonymous image via Shutterstock

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

When Megaupload was shut down a week ago by the Department of Justice and FBI for allegedly profiting from copyright infringement, many of the service’s users complained that they lost personal, non-infringing files. Now those users are banding together to sue the government.

Megaupload founder Kim Dotcom and several other Megaupload employees were named in a 72-page indictment issued last week by the Department of Justice. The indictment against Megaupload alleges it is connected to a vast criminal enterprise that has caused more than $500 million in harm to copyright owners. If convicted, the company and its executives could serve many years in prison. Next up, Dotcom will face an extradition hearing on Feb. 22.

But the immensely popular site for file-hosting didn’t just allow users to share copyrighted movie and music files — many customers of the site used it to store and send personal files, just like you can on many other file-sharing sites on the web. When the site was taken down, Megaupload fans complained bitterly that the government had taken away access to legal files used for work, as noted by TorrentFreak.

In a response, the site Pirates of Catalonia, in collaboration with Pirate Parties International, is rallying former Megaupload users to sue the U.S. government. Pirates of Catalonia writes:

The FBI has caused incalculable damage, far in excess of the losses claimed by the content lobbies, in a fruitless attempt to prevent access to the media content hosted on Megaupload, some of which they claim to have been infringing copyright under US law. However, as much of the unlawful content will still be available via other services on the web, this action not only shows us the futility of these measures but also serves as a reminder that these files are not necessarily, nor have been shown to be, illegal in any country, including the US.

In contrast, by closing the service they have impeded the access to millions of archives of both private individuals and organisations, potentially causing huge personal, economic and image damages to a vast number of people. In addition, the Pirate Party understands they may have violated Articles 197 and 198 of the Spanish Penal Code by misappropiating personal data.

Users who have been affected by the Megaupload shutdown can sign the petition at Pirates of Catalonia’s Megaupload site.

“While SOPA and PIPA may be postponed from congress, this does not guarantee that our Internet rights will be upheld,” said an Anonymous member in a dramatic YouTube video proposing the take-down.

Last week websites “blacked out” as a form of protest against SOPA and PIPA, bills aimed at reducing copyright infringement at the cost of what some say will be censorship. Soon thereafter the government took down file sharing website Megaupload for copyright infringement, sending Anonymous on a hunt to take down various record labels’ websites, as well as the Department of Justice. Now, for at least one Anonymous member, taking down Facebook is the next way U.S. citizens can get the government’s attention.

“There is no way you can get caught,” said the member. “Hundreds of thousands of us citizens and those of the Anonymous idea will all be participating … This is your chance. Our chance. The fate of the Internet rests in your hands.”

In a YouTube video posted this morning, the group calls on the U.S. public to download the same tool used to take down the DOJ website last week. The tool is called LOIC, or a Low Orbit Ion Cannon. This tool shuts websites down by launching information packets at the servers thousands of times. When a website’s servers are processing so many access requests, it overloads and shuts down. But Facebook isn’t just a computer in a Harvard dorm room anymore. It has a massive number of servers, aimed at holding the site up for its 800 million members.

“While it is true that Facebook has at least 60,000 servers, it is still possible to bring it down,” said the Anonymous member. “Anonymous needs the help of the people.”

The tool must be used at the same time in order to be affective on this many servers, according to the member, who has set the time of 12am (we’re assuming UTC) on January 28 for the attack. Around that time, watch out for links on the Twitter handles of Anonymous members. During last week’s attacks on the DOJ, some members were tricking people into “helping the cause” by providing links to LOIC, which would then use an innocent bystander’s computer to take down the targeted site.

In 2011, the group vowed to “kill” the social network on November 5, the same date Guy Fawkes, a member of the Gunpowder Plot, was arrested watching explosives to be used in an assassination attempt against King James I. Soon after announcing its intentions, other members of Anonymous explained the attack was created by exterior Anonymous members and was not supported by most of the group.

Whether this one is legitimate or not, the group seems to have a sense of humor. To send LOIC off into a server crashing rampage, a user must click a button reading, ” IMMA CHARGIN MAH LASER.”  And, for Anonymous, these lasers are set to stun.

hat tip CNET

The Department of Justice has charged popular file-sharing web site Megaupload with a “mega conspiracy” that, it alleges, netted the company’s executives a vast cache of money and luxury cars.

The indictment (see below for the full text in Scribd) refers to Megaupload’s offenses as the “Mega Conspiracy.” The company has been charged with five different counts concerning copyright infringement and money laundering. According to the indictment, Megaupload’s offenses include:

1. Running Megavideo.com, which streams copyright infringed television shows and movies
2. “Willfully reproduced and distributed” copyrighted content on its servers
3. Offering money as an incentive to upload infringing content between the dates of Septmeber 2005 and July 2011
4. Not terminating copyright offending accounts, as it states it can do in the Megaupload terms of service
5. “Made no significant effort to identify users” of the site, uploaders of copyrighted content, or the content itself

If found guilty, the defendants could spend up to 20 years in jail and might be liable for up to $175 million in fines.

“It’s really that inducement scenario that harkens back to the days of Napster,” said Owen Seitel of Idell & Sietel LLP, an entertainment and IP law firm. “I wouldn’t be surprised if the site totally shut down and never came back.”

By inducement, Seitel is referring to the action of offering financial compensation in exchange for uploading copyrighted content. On big sites like these, he explained, there is bound to be copyrighted material floating on the servers. But there are “safe harbors” that third-party content sites can take to protect themselves. One of these is complying with “notice and take down structures,” or flagging when copyrighted content comes into the system and then removing it. According to the indictment, Megaupload did not comply by flagging or removing content.

What’s really eye-opening about this indictment is the property that the Feds have seized from the defendants. It lists a number of bank accounts, PayPal accounts, 15 Mercedes-Benz vehicles, a Rolls-Royce with the license plate “GOD,” a rare Lamborghini and a Maserati. It seems the defendants had a number of vehicles with creative license plates including “HACKER,” “POLICE,” “STONED,” “GOOD,” “CEO,” and the ominous “GUILTY.” (See below for the full list.)

In addition, the indictment alleges the company or its associates spent a total of almost $8 million on yacht rentals in the Mediterranean from April to June 2011.

Seitel explained “indictments by their nature are overreaching” and that these allegations should be taken with a grain of salt.

Prior to being shut down by the DOJ, Megaupload released a statement calling the accusation of mass copyright-infringement “grotesquely overblown.” Indeed, a number of music celebrities have come out in support of Megaupload, prior to today’s events. The company’s new CEO, Swizz Beatz, is a musical artist himself and is married to singer Alicia Keys.

“It doesn’t surpise me to see celebrities on the side of the people when they’ve already been paid,” said Seitel, “It’s really not their content getting ripped off, it’s the studios’.”

In response to the indictment, hacker collective Anonymous took down the Department of Justice’s website, along with other music label sites. According to a tweet by @YourAnonNews, an impressive 5,635 Anonymous members contributed to the site attacks. It is rumored the group is planning to attack WhiteHouse.gov. The take down tactic being used is called LOIC, otherwise known as a low orbit ion cannon. LOIC is a public system that can be used to perform denial of service attacks.

The five different counts Megaupload faces include conspiracy to commit racketeering, conspiracy to commit copyright infringement, conspiracy to commit money laundering, criminal copyright infringement by distributing a copyrighted work being prepared for commercial distribution on a computer network & aiding and abetting of criminal copyright infringement, and criminal copyright infringement by electronic means & aiding and abetting of criminal copyright infringement.

Here’s the full list of seized goods, not counting bank accounts:

• 2010 Maserati GranCabrio, VIN ZAMKM45B000051328, License Plate No. “M-FB 212” or “DH-GC 470”, registered to FINN BATATO;
• 2009 Mercedes-Benz E500 Coupe, VIN WDD20737225019582, License Plate No. “FEG690”;
• 2005 Mercedes-Benz CLK DTM, VIN WDB2093422F165517, License Plate No. “GOOD”;
• 2004 Mercedes-Benz CLK DTM AMG 5.5L Kompressor, VIN WDB2093422F166073, License Plate No. “EVIL”;
• 2010 Mercedes-Benz S65 AMG L, VIN WDD2211792A324354, License Plate No. “CEO”;
• 2008 Rolls-Royce Phantom Drop Head Coupe, VIN SCA2D68096UH07049; License Plate No. “GOD”;
• 2010 Mercedes-Benz E63 AMG, VIN WDD2120772A103834, License Plate No. “STONED”;
• 2010 Mini Cooper S Coupe, VIN WMWZG32000TZ03651, License Plate No. “V”;
• 2010 Mercedes-Benz ML63 AMG, VIN WDC1641772A608055, License Plate No. “GUILTY”;
• 2007 Mercedes-Benz CL65 AMG, VIN WDD2163792A025130, License Plate No. “KIMCOM”;
• 2009 Mercedes-Benz ML63 AMG, VIN WDC1641772A542449, License Plate No. “MAFIA”;
• 2010 Toyota Vellfire, VIN 7AT0H65MX11041670, License Plate Nos. “WOW” or “7”;
• 2011 Mercedes-Benz G55 AMG, VIN WDB4632702X193395, License Plate Nos. “POLICE” or “GDS672”;
• 2011 Toyota Hilux, VIN MR0FZ29G001599926, License Plate No. “FSN455”;
• Harley Davidson Motorcycle, VIN 1HD1HPH3XBC803936, License Plate No. “36YED”;
• 2010 Mercedes-Benz CL63 AMG, VIN WDD2163742A026653, License Plate No. “HACKER”;
• 2005 Mercedes-Benz A170, VIN WDD1690322J184595, License Plate No. “FUR252”;
• 2005 Mercedes-Benz ML500, VIN WDC1641752A026107, License Plate No. DFF816;
• Fiberglass sculpture, imported from the United Kingdom with Entry No. 83023712;
• 1957 Cadillac El Dorado, VIN 5770137596;
• 2010 Sea-Doo GTX Jet Ski, VIN YDV03103E010;
• 1959 Cadillac Series 62 Convertible, VIN 59F115669;
• Von Dutch Kustom Motor Bike, VIN 1H9S14955BB451257;
• 2006 Mercedes-Benz CLK DTM, VIN WDB2094421T067269;
• 2010 Mini Cooper S Coupe, VIN WMWZG32000TZ03648 License Plate No. “T”;
• 1989 Lamborghini LM002, VIN ZA9LU45AXKLA12158, License Plate No. “FRP358”
• 2011 Mercedes-Benz ML63, VIN 4JGBB7HB0BA666219;
• Samsung 820DXN 82” LCD TV;
• Samsung 820DXN 82” LCD TV;
• Samsung 820DXN 82” LCD TV;
• Devon Works LLC, Tread #1 time piece;
• Artwork, In High Spirits, Olaf Mueller photos from The Cat Street Gallery;
• Sharp 108” LCD Display TV;
• Sharp 108” LCD Display TV;
• Sony PMW-F3K Camera S/N 0200231;
• Sony PMW-F3K Camera S/N 0200561;
• Artwork, Predator Statue;
• Artwork, Christian Colin;
• Artwork, Anonymous Hooded Sculpture;
• 2009 Mercedes-Benz ML350 CDI 4MATIC Off-Roader;
• Sharp LC-65XS1M 65” LCD TV;
• Sharp LC-65XS1M 65” LCD TV;
• TVLogic 56” LUM56W TV;
• Sixty (60) Dell R710 computer servers.

Check out the Megaupload indictment on Scribd, or read it in the embedded window below:

Repossessed image via Shutterstock

Updated 6:24pm with statement from Anonymous.

Hacker collective Anonymous has hacked the Department of Justice and Universal Music‘s websites to protest the government’s decision to shut down the popular Megaupload file-sharing site.

The Department of Justice’s website has been intermittently down and up in the past hour, and we can only imagine hackers and government agents fighting for control like a scene out of a movie. Universal Music’s homepage has been down for the past hour as well.

The DOJ indictment against Megaupload alleges that it is connected to a vast criminal enterprise has caused more than $500 million in harm to copyright owners. If convicted, the company and its executives could forfeit $175 million in property, including 15 Mercedes, a Maserati, a Lamborghini, a Rolls-Royce with the license plate “GOD,” and a huge pile of computers and large-screen TVs. Four people, including Megaupload founder Kim Dotcom, were arrested earlier today in New Zealand, while three others are unaccounted for.

Anonymous has a history of attacking government and business websites. Recently Anonymous made headlines for hacking into Stratfor’s website and database, stealing credit card information and other sensitive details. Anonymous was also angry earlier this week about SOPA legislation in Congress, and targeted media executives like Sumner Redstone, head of Viacom.

In response to the Megaupload case, the Anonymous Twitter @YourAnonNews account wrote: “The government takes down #Megaupload? 15 minutes later #Anonymous takes down government & record label sites. #ExpectUs.”

Update: As the dust settled, Anonymous released a statement claiming that it took down the Department of Justice, Universal Music’s website, the RIAA, and MPAA. The statement also includes personal information about MPAA chief executive officer Chris Dodd, including two home addresses, phone numbers, as well as information on his wife, and children’s names and ages.

The statement reads, “We Anonymous are launching our largest attack ever on government and music industry sites. Lulz. The FBI didn’t think they would get away with this did they? They should have expected us.”

The @AnonOps Twitter account has posted several tweets in the past hour with the hashtags #OpPayback and #OpMegaupload

We’ve seen RIAA and MPAA websites intermittently not load, but we have not seen whitehouse.gov taken down as of yet.

Some recent tweets from the @AnonOps account can be viewed below:

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

The U.S. Department of Justice today put its stamp of approval on Google’s acquisition of Admeld, an online ad startup.

The $400 million deal was under some scrutiny to determine whether or not it posed antitrust issues.

However, as the DOJ’s Antitrust Division has found nothing objectionable in the deal, the acquisition will go through as planned.

“After a thorough review of the evidence, the division concluded that the transaction is not likely to substantially lessen competition in the sale of display advertising,” a representative noted in a statement issued by the division today.

The deal had been on hold at least since June 2011, when Google first officially confirmed it had entered into a contractual agreement to acquire Admeld.

At that time, Google Vice President of Display Advertising Neal Mohan stated, “The Admeld team is an example of the huge strides the industry is making — it has quickly developed a great service that is helping many major publishers manage their ad space more efficiently and profitably.”

Specifically, the startup’s service lets publishers to grab data about advertising performance from hundreds of ad networks, ad exchanges and other sources. This data allows the publishers to determine which ads are most and least effective — an area in which Google’s own services lag despite the search giant’s best efforts.

Admeld will work with Google’s display ad network and also with the Google-owned DoubleClick’s ad exchange. However, Google has stated that Admeld will also continue to work with ad exchanges owned and run by other companies, too, including rivals Yahoo and Google.

“For now, it’s business as usual,” Mohan wrote today on the company blog.

“Admeld’s products will operate separately to Google’s existing solutions (such as DoubleClick for Publishers and the DoubleClick Ad Exchange). But over time, there are opportunities to bring the best of both businesses together in a variety of ways; and to develop entirely new solutions, too.”

Admeld has taken a total of $30 million in funding since it raised its first round in 2008.

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Sprint on Tuesday filed a federal lawsuit seeking to block AT&T’s proposed $39 billion buyout of T-Mobile USA.

“Sprint opposes AT&T’s proposed takeover of T-Mobile,” Susan Z. Haller, Sprint litigation VP, said in a statement. “With today’s legal action, we are continuing that advocacy on behalf of consumers and competition, and expect to contribute our expertise and resources in proving that the proposed transaction is illegal.”

The suit follows a lawsuit filed last week by the U.S. government. The Justice Department argued that the merger would “substantially lessen competition” in the wireless market. The FCC also threw its weight behind the Justice Department.

Sprint has arguably been the loudest critic of the AT&T/T-Mobile deal because it would leave substantially less competition in the not-that-big U.S. mobile carrier space. Sprint CEO Dan Hesse (pictured) has said in the past that merger poses “real risks” and that Sprint would try to block it.

If the deal goes through, Sprint’s position in the market will become more marginalized. At present, there are four major carriers, with Verizon at No. 1, AT&T at No. 2, Sprint at No. 3 and T-Mobile at No. 4. If AT&T and T-Mobile customers are combined, AT&T becomes No. 1, Verizon takes second and Sprint becomes far and away the smallest major carrier.

It appears Sprint was emboldened by the Department of Justice’s lawsuit and wants to make sure AT&T and T-Mobile parent Deutsche Telekom have to jump through as many hoops as possible if it wants the merger to succeed. The government and Sprint’s lawsuits will act as major hurdles, but AT&T could still win if it is able to convince regulators that the deal will not harm consumer choices.

Update: AT&T has sent us its own statement concerning Sprint’s lawsuit. Read the full statement below:

This simply demonstrates what we’ve said all along – Sprint is more interested in protecting itself than it is in promoting competition that benefits consumers. We of course will vigorously contest this matter in court as AT&T’s merger with T-Mobile USA will: help solve our nation’s spectrum exhaust situation and improve wireless service for millions; allow AT&T to expand 4G LTE mobile broadband to another 55 million Americans, or 97% of the population; and result in billions of additional investment and tens of thousands of jobs, at a time when our nation needs them most.

Nortel’s patents relate to all manner of technologies, including Wi-Fi, social networking, and 3G and 4G wireless capabilities—all things that could help better position whatever tech firm ends up winning. Patent ownership can also come in handy for fighting back when another firm sues over a patent claim.

Google’s opening $900 million bid on Nortel’s patents was accepted by the DOJ a week ago, with bidding starting on Monday. The auction was originally supposed to take place on June 20, but it was delayed as other firms waited for bid approval.

Nortel filed for bankruptcy protection in January 2009, and since then it has been selling off its assets. Google’s $900 million bid will act as the floor for all other bids, so players like Apple and Intel will be allowed to submit their own higher bids after that.

U.S. antitrust regulators had been reportedly looking closely at Apple concerning its bid on Nortel’s patents because Apple could potentially stifle competition with them. If Apple controlled wireless 4G LTE patents, for example, it could pressure carriers into meeting its demands.

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

The Department of Justice just announced that it’s ready to approve Google’s proposed acquisition of flight information company ITA Software, as long as the search giant makes some concessions.

Google announced the deal in July of last year, saying it wanted to “build new flight search tools” using ITA’s data while continuing to serve ITA’s existing customers. Those customers include flight search websites Bing, Kayak, and Orbitz. Not surprisingly, this immediately drew antitrust scrutiny from the government.

It’s been pretty amusing to see how each of the major parties has characterized today’s news. Google said the DOJ has approved the acquisition. The Fair Search Coalition, a group of companies that oppose the deal, called the decision a “challenge” to the deal and “a clear win for consumers.” And the DOJ itself emphasized the fact it’s requiring Google to “develop and license travel software in order to proceed with its acquisition.”

So what actually happened? Well, the Justice Department proposed a “settlement,” which would lead to the acquisition’s approval as long as Google puts certain safeguards in place to make sure that ITA’s customers will be able to compete. Not only will the company have to build and license travel software for ITA customers, but it will also have to create internal “firewall” procedures to maintain some separation between the ITA team and Google’s new travel products. It will also be subject to a formal process to resolve complaints of anti-competitive behavior.

Judging from Google’s go-go-go blog post, it sounds like the company will agree to all of these terms.

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Yesterday, the FTC and the Department of Justice were reportedly readying an antitrust probe into Apple due to restrictive changes in its iPhone Developer Agreement. The changes banned the use of tools that convert apps built on other platforms into iPhone apps. Now we’re beginning to see more details leaking out.

The probe was apparently sparked by a complaint from Adobe, people familiar with the matter told Bloomberg. Apple’s new policy led Adobe to give up on its Flash-to-iPhone compiler, which would allow developers to build apps in Flash and easily turn them into iPhone apps. Adobe says that Apple is stifling innovation with the policy change, according to the sources.

Apple CEO Steve Jobs has made his distaste for Adobe’s Flash technology very clear over the past few months, and many believe the more restrictive Developer Agreement was a direct result of that attitude. Among his many complaints, Jobs believes that Flash is too unreliable to be on the iPhone, and a massive battery hog. Jobs contends that he’s protecting iPhone users by not supporting Flash, but of course, Adobe’s CEO thinks differently.

Apple may consider changing the policy to avoid a probe, according to the Wall Street Journal. While reverting the policy would seem like the easiest move for Apple to placate regulators, Jobs’s very public stance against Flash and third-party authoring tools for iPhone OS apps makes it difficult for Apple to back down.

Don’t miss MobileBeat 2010, VentureBeat’s conference on the future of mobile. The theme: “The year of the superphone and who will profit.” Now expanded to two days, MobileBeat 2010 will take place on July 12-13 at The Palace Hotel in San Francisco. Early-bird pricing is available until May 15. For complete conference details, or to apply for the MobileBeat Startup Competition, click here.