Kim Dotcom should be sent to the United States to stand trial on criminal charges, a New Zealand court has ruled.
In a decision delivered in district court this afternoon, Judge Nevin Dawson ruled the internet entrepreneur and his three co-accused - Mathias Ortmann, Bram van der Kolk and Finn Batato - were eligible for extradition to the US.
The FBI had been seeking their extradition on charges of copyright infringement, money-laundering and racketeering related to the now-defunct file-storage website Megaupload.
It was a result the Megaupload founder has been trying to prevent since his 2012 arrest during a dramatic raid on his mansion north of Auckland.
During a 10-week court hearing that ended last month, the men's lawyers argued Megaupload was created simply to allow people to store and share large files.
But the FBI claimed the site wilfully breached copyright on a mass scale by hosting illegally-created movie, music and software files.
The agency said the site aided and abetted users who uploaded such files by paying them rewards.
The court found in favour of the US arguments, which were presented by Crown prosecutors.
The "overwhelming preponderance" of evidence against the men established a prima facie case, Judge Dawson said.
All four were eligible for extradition on all counts, he said.
Read the full judgement online here
Under New Zealand's Extradition Act, Justice Minister Amy Adams must now decide whether to confirm the court's decision and go ahead with the extraditions.
But speaking to media briefly after the verdict was revealed, Mr Dotcom said he had already filed an appeal
"We have filed an appeal, I'm still on bail, and we'll go through the whole process to the very end. I'm disappointed, but that's all I have to say."
The men's families cried in the public gallery when Judge Dawson revealed his decision, but there was little reaction from the four men themselves.
Dotcom's lawyer, Ron Mansfield, told Checkpoint the decision was disappointing, but there was still a long way to go.
"There's no doubt that if the United States lost today they would be appealing to the High Court and no matter who loses in the High Court, they will appeal further - it is clearly a case that is destined for the Supreme Court."
Judge Dawson granted them bail but ruled that the four must report twice a week to a police station.
The lawyer for two of the accused said the decision was distressing for his clients and their families.
Kim Dotcom outside court after today's decision Photo: AFP
Grant Illingworth, who represents Mr Ortmann and Mr van der Kolk, said it had been a disappointing day, but they would be exercising their rights and taking further action against the decision.
"They are living under the shadow of extradition to a country in which they have never lived. They've never been residents of that country and they are going to be tried rigourously if this extradition process is upheld."
Mr Illingworth said an application for a judicial review had already been filed in the High Court, and an appeal will be filed against today's ruling.
Co-accused Finn Batato, who represented himself in court, also spoke briefly to media outside court.
"I'm a bit disappointed obviously, but that's all I can say right now."
During the hearing, Mr Dotcom's lawyer Ron Mansfield argued Megaupload was set up as a file-storing site, and there were a large number of people who were using it for that purpose.
Kim Dotcom awaits the outcome of his extradition hearing. Photo: RNZ/Diego Opatowski
Under digital copyright law both in New Zealand and the US, an internet service provider is protected from liability for the behaviour of its users, provided a major purpose of the service is legal, and the site complies with takedown requests.
It was therefore not Megaupload's responsibility if its users turned the service to illegal purposes, Mr Mansfield told the court.
The site's policy of only removing individual links, rather than the files themselves, was also legitimate, he argued.
That was because removing the file itself might cut off access to someone who had stored a lawful copy of it.
Kim Dotcom should be sent to the US to stand trial on criminal charges, a New Zealand court has ruled. Photo: RNZ/Diego Opatowski
The burden of proof for extradition is low - like a committal hearing in a domestic criminal case, prosecutors did not have to prove guilt; they needed only to show that on the face of it there was a case against the men.
The US case was that Megaupload could be used as a private file storage locker but that was not how most people were using it.
Instead, the vast majority were watching copyright-infringing files - many of them added to the site by a small pool of frequent uploaders.
Megaupload's senior employees aided and encouraged this behaviour, the US claimed - paying cash rewards to uploaders whose files proved popular, driving traffic and paying subscribers to the site.
Some of the most frequent uploaders earned more than $US50,000 over several years.
Megaupload received tens of thousands of takedown notices from copyright holders and the way the site dealt with these was further evidence it was deliberately preserving infringing content, the US said.
Instead of removing the file, Megaupload would only remove the link.
Kim Dotcom during the extradition hearing. Photo: AAP
That meant if a file had more than one link to it - and some popular files could be accessed through dozens of different links - it could still be accessed.
Throughout the hearing, the Crown referred to many Skype and email messages that the men - especially Mr van der Kolk and Mr Ortmann - had sent each other, as evidence that they were fully aware of, and complicit in, how their site was being used.
In one conversation, Mr van der Kolk told Mr Ortmann it would be counterproductive to try to save money by stopping reward payments to users who were uploading illegal files, "because growth is mainly based on infringement".
That was the "big flaw" in their business model, he said at another time.
"We are making profit off more than 90 percent infringing files."
Mr Dotcom - still their boss - sat just metres away in court as Crown lawyer Christine Gordon read out a discussion the pair had in 2007, worrying what the big-spending German would do if Megaupload did end up in legal trouble.
"What if the s*** really hits the fan," Mr van der Kolk asked Mr Ortmann in a Skype message.
"Would he grab the last little bit of money and take off?"