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Conflicting portrayals emerge of Megaupload founder

By Jethro Mullen, CNN
updated 10:10 AM EST, Thu January 26, 2012
  • Kim Dotcom is the founder of Megaupload, a site shut down by the U.S. last week
  • He is one of seven people indicted on copyright and other charges
  • Prosecutors say he could use multiple identities to flee New Zealand
  • His lawyer says he is law-abiding and wants to stay with his family

(CNN) -- The U.S. government claims he's the mastermind of a huge online fraud operation with multiple identities and a history of breaking the law and evading arrest, but his lawyer says he's a law-abiding entrepreneur committed to raising his young family in New Zealand.

The question is which of these descriptions of Kim Dotcom, the founder of the shuttered file-sharing website Megaupload, is closer to the truth?

Arrested by the New Zealand police in a raid last week, Dotcom is one of seven people indicted by the U.S. on accusations of operating an "international organized criminal enterprise responsible for massive worldwide online piracy of copyrighted works."

Megaupload's lawyers denied the charges, and online activists have rallied to the site's defense.

The arrests and the shuttering of Megaupload prompted an angry reaction from the activist hacking collective Anonymous, which took credit for temporarily crippling the U.S. Department of Justice, FBI and entertainment company websites after the prosecution was announced. Dozens of supporters attended Dotcom's court hearings in New Zealand this week.

Megaupload founder's lavish lifestyle
Hackers attack after Megaupload arrests

As he sits in jail awaiting an extradition hearing in the coming months, attention has focused on the extravagant lifestyle he appears to have enjoyed.

The U.S. authorities say Megaupload generated more than $175 million in illegal profits through advertising revenue and the sale of premium memberships.

The New Zealand news media appear fascinated by the new international celebrity, and the government is facing questions over why it granted him residency in the country despite his criminal record.

Judge D.J. McNaughton denied Dotcom bail and offered insights into his different descriptions.

Dotcom holds one German passport, under the name of Kim Schmitz, and two Finnish passports, under the names of Kim Tim Jim Vestor and Kim Dotcom. Prosecutors say the multiple passports, as well as bank accounts and credit cards from various countries linked to different names prove that Dotcom presented a flight risk.

His lawyers have countered that Dotcom thought the Finnish passport under the name of Kim Tim Jim Vestor had been canceled, and that the reason he had 25 credit cards in his possession at the time of his arrest was that he is a "collector" of credit cards. Most of the cards had expired, according to the defense lawyers.

He has prior convictions from 1998 related to computer hacking, from 2003 for insider trading in Germany and from 2011 for failure to disclose the number of shares he acquired in Hong Kong.

Dotcom is a resident of New Zealand, where he employs more than 50 staff, and Hong Kong, where he has a suite at the Grand Hyatt Hotel.

He is married to a Filipina woman with whom he has three children. His wife is pregnant with twins, and he is also the legal guardian of his wife's two brothers ages 11 and 14.

His lawyer, Paul Davison, argued the facts demonstrate his commitment to staying in New Zealand, where he obtained residency status in December 2009. But prosecutors and the judge have expressed concern that if Dotcom were able to make his way to Germany, his German nationality would make him immune from extradition proceedings.

In his judgment Wednesday, McNaughton said he could not exclude the possibility that with his "business effectively shut down in the United States and his bank accounts and assets frozen and facing prosecution on serious charges with the full weight of the United States government behind it" that Dotcom "may take whatever money is still available to him and run to safe haven in Germany."

The judge also expressed concern about the existence of a firearm found near Dotcom at the time of his arrest last week.

The New Zealand police used helicopters to storm Dotcom's mansion. He reacted by activating a "sophisticated security lock on his bedroom door and then retreating to a second 'panic room' hidden within his bedroom again secured by a security locked door," according to prosecutors.

When the police entered the inner room, they found Dotcom sitting cross-legged on the floor and "a loaded shotgun in a nearby safe."

Dotcom has admitted he doesn't hold a firearm license but says he was intending to apply for one. His lawyer argued that the presence of guns on the property was a precautionary measure because his wife is from the Philippines where the kidnapping of wealthy individuals or their children is a common occurrence.

It was also disclosed in court that Dotcom suffers from diabetes and hypertension. He has also been receiving treatment for a slipped disc. All reasons, his lawyers said, for not keeping him in custody.

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