[1] On 19 January 2012, the United States Department of Justice seized the domain names and closed down the sites associated with Megaupload after the owners were arrested and indicted for allegedly operating as an organisation dedicated to copyright infringement.

[7] The shutdown of Megaupload led to denial-of-service (DoS) attacks on a range of websites belonging to the U.S. government and copyright organisations by the hacktivist group Anonymous.

In return, the users running Megakey agreed to supply some personal identification and demographic data and to allow the substitution of ads on third party websites they visited with those of Megaupload.

[25] In July 2011, access to Megaupload and Megavideo was blocked in India for Reliance Entertainment customers,[26] after a court order was obtained, citing illegal copies of the 2011 film Singham on file hosting sites.

[27] On 19 January 2012, U.S. federal prosecutors in the state of Virginia shut down Megaupload and laid charges against its founder Kim Dotcom and others for allegedly breaching copyright infringement laws.

[30] Megaupload responded by stating: "Activity that violates our terms of service or our acceptable use policy is not tolerated, and we go to great lengths to swiftly process legitimate DMCA takedown notices.

[35] On 9 December 2011, Megaupload published a music video entitled "The Mega Song," showing artists including Kanye West, Alicia Keys and will.i.am endorsing the company.

[49] Acting upon a US Federal prosecutor's request, the New Zealand Police arrested Dotcom and three other Megaupload executives in a leased $30 million mansion at Coatesville near Auckland on Friday, 20 January 2012 (NZDT, UTC+13).

Judge David McNaughton expressed concern at the discovery of two shotguns at Dotcom's mansion during the police raid,[57] and deferred a decision on whether to grant bail, saying that he needed more time to review the submissions.

[58] The request for bail was turned down, with Judge McNaughton saying that "he was denied due to the risk [that] Mr. Dotcom would flee jurisdiction and the possibility that if he reached Germany he wouldn't be extradited to face the charges".

[60] On 22 February 2012, North Shore District Court Judge Nevin Dawson overturned the previous rulings and granted bail to Kim Dotcom,[61] saying that the risk of flight had diminished after his assets had been seized.

[62] On 5 March 2012, a formal request for the extradition to the United States of Kim Dotcom and three other senior Megaupload staff was filed in a New Zealand court.

[63] On 30 April 2012, the New Zealand High Court ruled that around $750,000 of Kim Dotcom's assets could be returned, including a Mercedes-Benz G55 AMG and Toyota Vellfire that had been seized during the raid on his home.

During April 2012, US district court judge Liam O'Grady stated "I frankly don't know that we are ever going to have a trial in this matter," as he found out that the company had never been formally served with criminal papers by the US.

"[65] On 10 July 2012, a decision on whether Kim Dotcom and other Megaupload employees should be extradited to the United States was delayed until March 2013, in order to allow further time for legal arguments to be heard.

[67] On 24 September 2012, New Zealand's Prime Minister John Key ordered an inquiry into whether staff at the Government Communications Security Bureau had unlawfully spied on Kim Dotcom and the other defendants in the case.

[69] On 8 September 2014, the Court of Appeal ruled that the New Zealand Police were to return seized electronic devices unencrypted back to Dotcom and those involved.

[70] On 23 December 2015, New Zealand judge Nevin Dawson ruled that Kim Dotcom, as well as three of his colleagues, can be extradited to the United States to face copyright infringement charges.

The indictment provided instances alleged to show criminal behaviour, as well as indicating design points of Megaupload's operating model as being evidence of criminal intent:[1] Defense attorney Ira Rothken says that the raid was unjustly swift and did not give his client the opportunity to defend himself, quoting a similar case involving YouTube as an example of a completely different turnout.

The legal concerns included: The US Digital Millennium Copyright Act provides safe harbor for sites that promptly take down infringing content.

[81] In a television interview with 3 News, Kim Dotcom said he was not a "piracy king," and said that Megaupload had applied the provisions of the DMCA and went beyond it, by giving copyright holders direct rights to delete links.

[82] Kim Dotcom denied the charges filed against him and retained the services of Ira P. Rothken, an attorney who has defended several copyright infringement cases.

[77] Eric Goldman, a professor of law at Santa Clara University, described the Megaupload case as "a depressing display of abuse of government authority".

[5] Other legal commentators have expressed more scepticism toward Megaupload's likelihood of defending against charges of aiding and abetting copyright infringement on "willfulness" grounds if the allegations of fact in the indictment turn out to be true.

[79] The defense has drawn on procedural errors by the prosecution to challenge the case and in a judgement at the end of May 2012, New Zealand judge David Harvey granted the defendants the right to the disclosure of evidence held by the FBI in preparation for the extradition trial.

[89] In his 81-page decision, he came to the assessment that the DoJ is attempting to use concepts of civil law, in particular secondary copyright infringement, in a criminal case, which creates legal issues.

[104] Links posted in chatrooms and on Twitter, when clicked on by unsuspecting Internet users, ran a web version of the application known as the Low Orbit Ion Cannon.

On 19 January 2012, Anonymous released a statement on Pastebin.com taking responsibility for the mass attacks on websites including those of RIAA, MPAA, BMI, FBI, and others.

[108] Web organisations have raised concerns about possible effects of the Megaupload case on the future of file sharing, cloud storage, and Internet commerce.

[109][110][111] Various commentators including John C. Dvorak, Glenn Greenwald, and Julian Sanchez have written on the topic as well, particularly as it relates US government powers to take down a web site without a trial, even without new laws like SOPA.