Sludge Report #198
Ubiquitous Encryption - The Promise Of Kim Dotcom's MEGA
By Alastair Thompson
SCOOP NOTE: While the following story is about Kim Dotcom and his new encrypted data delivery network MEGA.co.nz, it
addresses a great deal more than piracy and copyright law enforcement. The author - Scoop founder, editor and General Manager Alastair Thompson (a member of the New Zealand Parliamentary Press Gallery for
20 years) - brings together a range of observations, images and videos on aspects of what is unquestionably the biggest and most
nuanced NZ internet story ever. The context given here - particularly for an international audience – demonstrates how
confusing the story of Kim Dotcom and Megaupload is for New Zealand and New Zealanders. The author seeks to explain why
that is the case (it's due to a complicated matrix of factors), and in the process reveal the true scale of the story
that our nation has unwittingly become a part of.
In this edition of the Sludge Report:
Scoop Independent News - Scoop.co.nz - Raw footage of the re-enactment of the raid portion of the MEGA.co.nz launch
held at the Kim Dotcom Mansion near Albany, Auckland on 20th January 2013. The footage was filmed in HD by former Scoop
duty editor David McLellan using a Nokia Lumia 920 Windows Phone. The footage is uploaded raw, just as it was recorded.
Original raid footage filmed by the NZ Police Special Tactics Group as they raided the mansion at the request of the FBI
in a globally coordinated police action on January 20th 2012 is HERE
. The official MEGA.co.nz re-enactment footage can be found on MrKimDotcCom
's Youtube Channel HERE
(video includes full version of launch Press Conference - and at 42 mins, 49 seconds a question from the author
Size Matters - Two Weeks To The Biggest NZ Website Ever
We need a starting point for this discussion, and as size is what both MEGA (and to some considerable extent Kim Dotcom)
are all about, we shall start there.
MEGA is big and New Zealand is small. Right now New Zealand doesn't really have a clue about how much bigger Kim Dotcom
is than they realise.
New Zealand is a small country - four million people, on the edge of the map. Internationally we are known for sheep,
bungy jumping, hobbits and furry fruit. A substantial portion of Americans think we are across the Sydney Harbour Bridge
New Zealand's entire internet footprint is significantly smaller than Kim Dotcom's Megaupload global storage and
transmission network. While the writer could not find any exact figures for NZ's traffic utilisation, some sources put
it somewhere below 100 Gbps (100,000 megabits).
By way of comparison according to Wikipedia the theoretical lit? capacity of the Southern Cross Cable (theoretically if
all circuits were sold and running at maximum speed) is 2 Terabits.
According to MEGA spokesman Finn Batato, Megaupload's peak utilisation in December 2011 and January 2012 was 1.5
On the basis of these figures Megaupload's traffic footprint at the time of shutdown was roughly 20 times larger than
the entire nation of New Zealand. And assuming it were possible to stick all the world's Megaupload traffic down the
Southern Cross Cable it would near as fill it to brim.
Meanwhile after only two and half weeks of operations MEGA.co.nz's traffic volumes are already huge.
After briefly peaking at a level of global reach very close to that of the Guardian Newspaper (see image below)
MEGA.co.nz has settled back to a level of usage (in terms of numbers of users) which is close to that of Trademe.co.nz
Trademe.co.nz - which was till now by far the biggest New Zealand website by all measures.
Click for big version
(Source Alexa.com - MEGA.co.nz
While mega.co.nz has declined from a launch peak to sit at approximately the same traffic rank as Trademe, we can
safely assume that MEGA is already the biggest New Zealand site by traffic volume by a substantial margin because it’s
in the business of moving large amounts of encrypted data. MEGA has a sub-top 1000 site ranking in 20 countries already including several large ones such as Spain, France, Brazil
According to MEGA's Batato mega.co.nz
broke the 50 million files uploaded mark less than two weeks after its launch (that’s 12 files for every New
Zealander), and at the current pace, it will surpass Megaupload's number of registered users in a few months' time.
"User feedback is overwhelmingly positive, the main criticism being the lack of dedicated syncing and mobile
applications - only once these are available, will MEGA become really useful, and they will be a few weeks down the
road," Batato told Scoop.
And this is the first thing that New Zealand and New Zealanders have so far failed spectacularly to understand.
The size of MEGA is a lot bigger than they think.
He Who Must Not Be Named (In Polite Company)
Kim Dotcom has attained the status of the first true Kiwi-resident internet Superstar.
In New Zealand we revere Sam Morgan
, the young Kiwi entrepreneur whose Trademe website completely dominates the NZ e-tailing space and which is responsible
for the lion's share of time spent/page views online on New Zealand based websites (allowing that most NZers spend most
of their online time browsing overseas websites).
Meanwhile New Zealand's most significant internet technical star is probably Dr Craig Neville Manning
who holds a very senior position at Google and founded Google's software engineering center in New York City in April
There are a few other mildly stratospheric technology players who hail from NZ such as Chris Liddell
whose stint as CEO of Microsoft coincided with the launch of Windows Vista.
meanwhile first landed in our nation in December 2008 and returned for a longer visit in August 2009. He was granted
residency in November 2010 and spent $600,000 that year on a fireworks display to celebrate the residency decision.
At the time Megaupload was responsible for around 1% of total traffic in both the US and Europe, 2% of traffic in the
Asia-Pacific region and 11% in Brazil (reference gigaom.com
Megaupload was very big indeed.
Yet in NZ if you mentioned Kim Dotcom in official circles the response was almost universally a rather po-faced "Kim
That was certainly the reported reaction of Prime Minister John Key when informed by his officials on the day before the
black helicopter raid on Dotcom's house
. (see more discussion about Prime Minister John Key's knowledge of the existence of Kim Dotcom below "Amnesia Of The Johns - When Irony Attacks"
When Kim Dotcom recently suggested that data-exporting could be a business model for NZ, that NZ could become a
Switzerland for data, and that he might assist with the financing of a second cable to New Zealand a chorus of leading
NZ technology commentators quickly dismissed this as foolish pie in the sky hyperbole.
And many journalists and politicians have been asking all year if the Kim Dotcom story "has legs".
Lower level government officials operating in Scoop's hometown of Wellington are mortally afraid of the prospect of any
association with Kim Dotcom whatsoever.
In advance of the 30 January speech in Wellington by inventor of the web Tim Berners-Lee - the writer suggested it would
be interesting to know what his views were on the Kim Dotcom saga . To which Clare Curran, the NZ Opposition
spokesperson on IT and Internet issues responded by saying:
reckon there's more to the internets than KDC (no disrespect)— Clare Curran (@clarecurranmp) January 29, 2013
Apologies, but some of this page's content can only be viewed on the desktop version of the site.
Barely disguised code for ‘enough already of all the Kim Dotcom stuff’. (See more about Sir Tim Berners-Lees views on
the Kim Dotcom subject matter below.
Just this week the host of New Zealand's version of the "Most Wanted" TV genre show http://www.police.govt.nz/wanted/ten7
Police Ten 7 remarked that the Kim Dotcom story’s high profile was entirely unwarranted and the result of a gullible media.
The reality however is that this is a story which involves – in no particular order - illegal spying, Prime Ministerial
amnesia, an armed raid on a mansion on behalf of the FBI (seemingly at the request of the US Vice President acting on
behalf of Hollywood), a 6ft 7inch German who loves fast cars, alleged misdeeds by several cabinet ministers, an army of
Lawyers and a challenge to the effectiveness and legality of the global spy network…
It’s no surprise As you might appreciate the media are is lapping it up.
And so are the public. Here too Kim Dotcom is fast becoming a star thanks in part to his extraordinary (and very
un-Kiwi) PR antics, the most spectacular example of which was this Flight Risk: Kim Dotcom's Unexpectedly Eventful Journey
The Goldfish Bowl Effect
It would be fair to observe that inside NZ we are presently having a love-hate relationship with the flamboyant founder
But outside NZ his importance is more clearly understood.
Here in New Zealand people opine that Kim Dotcom is not a significant figure of the internet like in the realm of an
Aaron Swartz, Julian Assange, Jimmy Wales or a Mark Zuckerberg and yet that is precisely what he now is, a global
Last week (January 30th) another giant of the internet - inventor of the Web Tim Berners-Lee visited Wellington.
Berners-Lee is the world's leading proponent of an open web and Public Lecture in New Zealand was on the subject of
"openness", a subject that he addressed from multiple angles. Scoop's coverage of the lecture (including video of the
Press Conference which followed can be found HERE "World Wide Web Inventor Tim Berners-Lee In Wellington | Scoop Video Public Lecture + Press Conference"
Unfortunately Berners-Lee, who works at a diplomatic level as a kind of unofficial Secretary of State for a Free
Internet - was like most official sources not at all keen to discuss Mr Kim Dotcom by name. Tim Berners-Lee's public lecture
on January 30th did not mention Kim Dotcom at all.
However the issue was raised in the second question from the floor and also at the Press Conference.
It seems likely that having met with the New Zealand Prime Minister John Key earlier in the day Berners-Lee was well
aware of the sensitivity of the subject in New Zealand, and being a very diplomatic chap did not wish to further inflame
what is clearly a very complicated and delicate situation .
However several remarks by the inventor of the world wide web in his first public visit to New Zealand can be
interpreted as meaning that the Dotcom/Megaupload affair is of considerable interest to the free internet's leading
Firstly Berners-Lee concluded his lecture saying that the two things he was most concerned about on the current world
wide web were threats of government and corporate interference of two particular kinds: blocking and spying. (Arguably Megaupload and Kim Dotcom are the largest and most public illustrations of both sides of both these issues.)
Earlier, when speaking about "Open Platforms", Berners-Lee stressed the importance of networks not being restrictive
about what devices connect to them and - importantly - what software they run. While he did not mention Kim Dotcom in
this discussion it effectively relates to whether ISPs and Telecommunications Companies (and their host Governments)
should attempt to regulate devices and software can connect to the internet. ( MEGA - a brand new encrypted version of the largest file sharing service ever deployed Megaupload - is the largest
ever deployment of client side encryption technology - i.e. encryption which takes place inside your computer or phone.
And finally Berners-Lee also sung - very proudly - the praises of the HTML 5 evolution of his invention (HTML). HTML-5
he said would create a much smarter, more mobile, more intelligent (but still open) and responsive web as a result of
making pages programmable and standardising and opening the programmable parts of web standards. (MEGA is a very sophisticated example of HTML 5 technology which is why MEGA recommends its users use Google Chrome -
the most standards compliant of the web browser platforms. When you access MEGA.co.nz the encryption software is loaded
from the page source on the fly eliminating the need to install software on your computer to both access and produce
fully encrypted data - enabling this to be done effectively from all devices, everywhere, simply).
Enter Stage Left MEGA.co.nz
Until the launch of MEGA.co.nz Kim Dotcom's profile in New Zealand was mainly premised on being a source of legal
consternation, law and security service embarrassment, and presenting a constitutional law conundrum.
After the launch of MEGA.co.nz Kim Dotcom has arguably become an economic opportunity. Not that anyone significant is
willing to say so yet.
This is partly because the implications of MEGA.co.nz are so huge, so threatening and so hard to understand for New
Zealand. And it is also partly due to the fact that Dotcom offends New Zealanders' innate preference for
"It's a great part of the motivation behind it", Dotcom replied, "because, you know, before all this happened to me I
was living in this happy bubble. I didn't know too much about spying, I didn't care too much about it, and when this
happened to me I started doing my research and it's unbelievable the large scale spying that is going on today. I was
like wow, how can that all be legal, where are our rights to privacy and that's why we were motivated to develop this
Ubiquitous Encryption - The Promise Of MEGA
Espionage is an arms race in technology, and the launch of MEGA.co.nz is a significant milestone in that race.
What makes MEGA.co.nz
different than anything before it in the world of cloud storage is its promise of ubiquitous "military grade"
MEGA.co.nz is offering to restore something which looks a lot like privacy to an online world which had largely
forgotten the meaning of the word.
MEGA.co.nz takes longer than your average website to load because the page that you load is much cleverer smarter than
your average web-page.
When you connect to MEGA.co.nz your browser (running on your own computer) is itself the encryption engine. Via a series
of fairly clever tricks - which appear to be still evolving as they are critiqued by cryptographers from around the
world - MEGA.co.nz gives the keys of encryption solely to the computer user.
In order for anyone - including MEGA.co.nz - to see what the contents of any mega file are they need either to have (1)
access to the computer of the user, or (2) permission from the user.
This differs from many online encryption systems (Google Drive, iCloud, M$oft Cloud, Amazon etc.) where the keys to the
encryption are held (safely) by the cloud storage provider.
MEGA's Explosive Growth
In the first part of this story we remarked on the spectacular growth path of the MEGA.co.nz site in becoming the
largest NZ site on the web in under a month.
It seems very likely that this pace of growth was also a huge surprise to its creators.
People in the internet business are used to strong and steady starts followed by - if you have a winner - what they call
the "hockey stick" trajectory of exponential growth.
It appears that this was not the case with MEGA.
Instead MEGA ignited like a bonfire. From zero to incandescent in a very short space of time indeed.
The fact that the platform has been able to absorb these insane levels of growth and survive is a tribute to the
capability of the engineers who have deployed it - and is probably down to the fact that they had already built and
deployed the world's most popular distributed cloud-storage network in Megaupload.
However the question begged most loudly by the insane growth of MEGA.co.nz is not how, but why?
Why do millions of people want to trust Kim Dotcom - a person whose business was destroyed when his file systems were
seized by the FBI, along with their data?
And the answer to this question is obvious in an Emperor's new clothes like fashion.
There is a simply huge desire for privacy among users of an Internet which appears to have forgotten the meaning of the
Because Privacy Demand Is Huge - MEGA's Implications Are Also Huge
On one level (as explained by Dotcom himself) MEGA is a simple response to a desire to put privacy back into his own
life and that of his business partners.
However by doing so as easily as he has done (five months from conception to launch), and by effectively striking oil by
experiencing such astronomical levels of uptake, MEGA has opened a pandora's box.
MEGA has shown:
1. that this form of encryption technology can be deployed effectively and relatively easily - at scale;
3. that there is massive latent demand for it among internet users.
This creates the conditions for massive investment to follow.
And because the latest wave of multi-threaded multicore processors + HTML 5 have made it possible to build and deploy
client-side (i.e. in your phone) browser-based encryption services - which make the data stream invisible to the network
- it is now possible for these services to quickly become ubiquitous.
What this means is that it is now possible to build a secure viber like untappable voip network and indeed according to
the founders of MEGA, the idea of providing API like tools to serve as the authentication and transport layer for these
services has already been identified as an enhancement of their MEGA product offering.
And that is the promise of MEGA.
To restore privacy to the internet.
As Dotcom himself tweeted:
is the PRIVACY company. Not the PIRACY company.— Kim Dotcom (@KimDotcom) February 1, 2013
Apologies, but some of this page's content can only be viewed on the desktop version of the site.
The NSA Reaps A Whirlwind
Before the launch of MEGA.co.nz Kim Dotcom was firmly in the gun sights of the Motion Picture Association of America.
They wanted him stopped. And on January 20th 2012 they got their way.
After the launch of MEGA.co.nz Dotcom has initiated a game-changing technology step change for the US National Security
Administration (NSA), the US Department of Homeland Security, the UK Goverment's GCHQ and indeed every spying and law
enforcement operation on the planet.
The full story of how Megaupload was shut down is yet to emerge.What is known already points towards a very heady
mixture of political influence, campaign finance and private use of the US law enforcement apparatus.
In this case through bowing to the wishes of corporate lobbyists - and in the case of NZ through some apparently extreme
foolishness - the security agencies involved in the shutdown of Megaupload have reaped a whirlwind.
For years (especially post 9/11) it has been widely reported
that our technology giants have been providing back-doors to high level security systems to the likes of the NSA - the
enormous US National Security Agency which does its best to run an all-seeing global surveillance operation.
The NSA is the lead US agency in an intelligence partnership called UKUSA
which includes NZ, Australia, Canada, the UK and the USA. The NZ agency in this partnership being the GCSB (Government
Communications Security Bureau).
The so called "Echelon" surveillance network
which is operated by the five UKUSA powers is unquestionably the most effective signals intelligence (spying)
technology ever built.
Cynical observers have long suggested that by using this network spy agencies get around the rules against spying on
their own citizens by spying on each other’s instead.
And in the Megaupload case this all went spectacularly wrong on the 24th of September last year.
Unlawful GCSB Activities - NZ PM John Key Press Conference 24 Sept 2012
On September 24th 2012 the New Zealand Prime Minister John Key announced that he had initiated an inquiry into how the
GCSB had come to illegally spy on Kim Dotcom in the lead-up to the raids on his house in January of that year.
The fact of Kim Dotcom's surveillance by the NZ arm of the global Echelon spy network emerged as a result of the legal
process around US attempts to extradite him, and information obtained by the legal team working for Dotcom.
In December 2012 the GCSB was enjoined to a case as a respondent in Judicial Review proceedings around the raid on
Dotcom's home. The judge in these proceedings had earlier found that warrants executed against Dotcom were both
illegally issued and improperly used. And it appears that the police officer in charge of the New Zealand end of the
copyright enforcement action not only used illegal unwarranted surveillance techniques, but that he also lied about this
in the High Court Proceedings.
In her December decision the judge in the Judicial Review proceedings Justice Winkleman ordered, among other things,
that the GCSB produce a full accounting of all surveillance activity against Dotcom.
This is the first order of that nature ever issued in the New Zealand legal jurisdiction and is extraordinarily unusual.
While we do not know what this has revealed yet, Dotcom’s increasingly strident statements on the matter suggest there
is more dirty laundry from the New Zealand Government yet to come.
Amnesia Of The Johns - When Irony Attacks
Kim Dotcom's song Amnesia
At this point in the story behind why we have leading up to the MEGA launch we need to go back a few months and examine
how Kim Dotcom found his way into the sympathies of the New Zealand public.
In the days after the raid the main line of questioning by the NZ Press Gallery in the developing Kim Dotcom saga was:
"Why did this notorious international criminal get residency in New Zealand?"
However this chorus soon changed, mainly as a result of the amnesia of the Johns.
In April the story was kicked off by this remarkable report from New Zealand's leading TV current affairs host John
Campbell of Campbell Live: Banks knew about 'anonymous' Dotcom donation - reports
In the report John Banks - a sitting cabinet minister in the newly elected John Key Government and a critically
important coalition partner of the government - was recorded claiming that he could not remember being taken by
helicopter to Kim Dotcom's mansion and being offered a $50,000 donation towards his campaign for the Auckland Mayoralty.
Nor could he remember whether he had received the donation though it was subsequently alleged that he had himself asked
that the donation be split into two $25,000 cheques so he could get it processed and declared as anonymous.
In New Zealand politics any hint of a blatant lie is usually fatal for a cabinet minister's employment. Ther are
numerous examples of Ministers being stood down for far lesser offences even. However because the Government of John Key
so needed John Banks’ vote in order to pass legislation to enable a state asset sell-off, sacking him was not a ready
option in early 2012. And so it began.
In May 2012 TV3 followed up the John Banks amnesia story with a fascinating report. Who knew what about Kim Dotcom
which begged a very curious question:
How could it be possible, as the Prime Minister claimed, that the first time he had heard of Kim Dotcom was the day
before the raids on his house on 19 January 2012?
Dotcom lived in John Key's own electorate. Key's constituents had gone to his office and both complained about and
praised their new neighbour. Dotcom was a major political donor to John Banks' whose run for office was of significant
interest to John Key's first term government who had even engineered a gerrymander to facilitate a Banks win . In
addition Dotcom was a significant high value high-tech economic migrant to New Zealand, and had paid for a $600,000
firework display to celebrate being granted residency.
Several of John Key's fellow cabinet ministers did know about Kim Dotcom. Justice Minister Simon Power and Lands
Minister Maurice Williamson had been involved in the overseas investment office deliberations over whether he should be
allowed to purchase his house.
Two other ministers - Attorney General Chris Finlayson and Police Minister Judith Collins - were aware of Kim Dotcom due
to their being in the loop - alongside Justice Minister Simon Power - over the joint FBI Police operation against
By now the question of his Amnesia was being regularly put to John Key directly. And he consistently stuck to his guns.
He had never heard of Kim Dotcom until January 19th 2012.
John Key even asked his staff to do an exhaustive search of documents to see if they could find anything to contradict
him. They couldn't do so. Not to his knowledge anyway.
The Constitutional Conundrum of Prime Minister John Key's Dotcom Amnesia
Taken together the Prime Minister's lack of knowledge of anything Dotcom related, and the revelations of illegal spying,
moved the Dotcom saga up a notch as a political story.
This is because the Prime Minister is also the Minister solely responsible for oversight of the GCSB.
Before the GCSB revelations the Dotcom story had been an embarrassment which was playing out mainly in the courts.
With the introduction of alleged GCSB misconduct to the frame the Prime Minister was personally and directly brought
into the line of fire in the New Zealand Parliament The story then set a course towards becoming a constitutional
When announcing the GCSB screw-up on the 24th of September the Prime Minister was asked when he became aware of the GCSB
involvement in the Dotcom inquiry? The PM replied saying he had found this out on the September 17th a week earlier.
(NOTE: News of the GCSB involvement in the case prompted John Campbell to broadcast another from-the-hip marvellous
editorial : http://www.3news.co.nz/The-New-Zealand-institutions-that-broke-our-trust/tabid/367/articleID/272227/Default.aspx
The New Zealand institutions that broke our trust
Sensing blood the opposition turned up the heat in Parliament questioning the Prime Minister's recollection and probing
the issue of who knew what when.
In the midst of this drama a leak from inside the GCSB revealed that Dotcom had been mentioned in a briefing at the GCSB
at which Key had been present - thereby contradicting his earlier statements to the media and to the house.Key was
forced to apologise to the house. But before he could do so there was a significant breakdown in Parliamentary decorum
leading to the sending from the house of two senior MPs
(Related Links: The Scoop.co.nz team reported this period in these reports:
Also on 18 October the writer sought the opinion of one of the most senior members of the New Zealand Parliament, New
Zealand First Party Leader Winston Peters, on the fast developing constitutional crisis.
Winston Peters expressed a view that there was no adequate procedure available for Parliament to hold the Prime Minister
to account over these matters and that this gave rise to questions around the efficacy of the constitutional
arrangements when it came to matters such as these.
We Have Only Just Begun
All of which is to say (and congratulations if you have read this far) that this is a story that reaches across a very
broad array of touch points within the New Zealand security, political and legal apparatus.
And it is a story which is very arguably still in its early phases.
As the court process continues to roll on, further revelations will almost certainly continue to emerge.
There are several distinct legal actions underway - all of which will continue to provide fuel to the fires of
According to informed sources the extradition case against Dotcom now looks likely to be pushed back into 2014. A
futures contract on this on the ipredict website is currently indicating just a 3% chance of extradition this year and
only a 9% chance in 2014.
2014 also happens to be a general election year to decide the next New Zealand Government.
Thankfully the Judicial Review proceedings in NZ and legal moves to strike out the charges in the United States are
moving considerably faster and these will potentially have a bearing on whether the extradition proceedings get dropped
In the political realm the story is also far from over.
Near the end of last year we also learned it was revealed via an Official Information Act release made to Radio New
Zealand that New Zealand's domestic spy agency the SIS had been asked to assist with the Dotcom case by the FBI in
October 2010, 14 months before the raid on the Dotcom mansion.
They had declined to do so and had instead referred the FBI to the New Zealand Police's new organised and financial
This is a significant new fact as it begs the question: When did the SIS Director Warren Tucker - a person who had
previously served as GCSB director - first learn that his sister agency was illegally spying on a New Zealand resident?
As a former director of the GCSB he would of course be very clearly aware of what limitations there are on GCSB
surveillance operations inside New Zealand.
And once he became aware of GCSB illegality did he inform the minister that he also reports to, Prime Minister John Key?
And then we have the question of the future of MEGA itself.
In the circumstances it does seem possible even probable - notwithstanding Dotcom's assertion that he is on very sound
legal ground - that legal proceedings will be brought against MEGA to try to shut it down.
These would most likely take the form of an application for an injunction to block the use of the mega.co.nz domain for
operations as this would probably be the most effective way to try to prevent the website from operating.
However any such action would almost certainly simply see a new escalation of all of the issues covered aboveadd still
further fuel to the fire, and run the risk of making MEGA even stronger if it failed.
Aside from the substantive issues related to whether we are entitled to store our own files in privacy Dotcom's lawyers
would be able to assert that the New Zealand Government is acting in bad faith having previously exercised illegal
warrants which were used to destroy his substantial global business.
It’s a long-held truism in journalism that some stories will just run and run. And there’s definitely no hiding from
this story – to be continued.