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The Rise And Fall Of An Internet Heavyweight: “Mega” Millionaire Kim Schmitz

After years of living large, German hacker turned celebrity Kim Schmitz is suddenly in serious trouble. At the behest of U.S. authorities, the Megaupload's founder was nabbed last week in New Zealand. Die Welt charts the unusual career of a “dotc

Kim Dotcom appearing before a New Zealand court on Jan. 23, 2012 (afpde)
Kim Dotcom appearing before a New Zealand court on Jan. 23, 2012 (afpde)
Kritsanarat Khunkham

BERLIN - Everything was always mega with Kim Schmitz: MegaPorn, MegaVideo, MegaLive, MegaPix. He was a mega hacker and a mega con man. As it turns out, he was also the guy behind Megaupload, the initial target of America's sudden anti-piracy crackdown.

At the request of U.S. authorities, police in New Zealand arrested four people last week for their alleged involvement with the download site megauploads.com. On the photograph released by the police there was – to the surprise of many here in Germany – a familiar face: Kim Schmitz.

He's 37 years old now, but he still has that baby face, still dresses in black, and is still twice the size of anyone around him. Schmitz is an Internet legend who for years has been off the radar. A hacker, race car driver, investor, playboy: Schmitz the outlaw became a multi-millionaire when the Internet was drawing megalomaniacally high investments. Schmitz is one of those dotcom golden era guys who were part of the reason the boom turned out to be an exploding bubble.

Now he's changed his name to Kim Dotcom aka "Kim Tim Jim Vestor," and he's back on the radar as the driving force behind a global file sharing site that was illegally putting TV series, movies, music, porn, and software out there.

Schmitz was born in 1974 in Kiel, Germany, and grew up in northern Germany. His father piloted the luxury cruise liner "MS Deutschland." His mother was a chef. He attended a posh boarding school, the Staatliche Internat Schloss Plön, and got his first computer when he was nine.Because gaming software cost too much for him to buy, he figured out how to make illegal copies and went into business selling them to friends for a few marks a piece.

"Smarter than Bill Gates'

Three years later, well before the World Wide Web was available to everyone, Schmitz used 12 telephone lines to hack into other computers. The jumbled mass of cables in his room, however, failed to send off any alarm bells. "My parents had no idea what was going on," he would say later. "To them it was all just a bunch of blinking little lights."

"Kimble" – his name in hacker circles, based on a character in The Fugitive – was a self-mythologizer who claims to have pulled off the spectacular coup of transferring $20 million from Citibank's account to Greenpeace. He liked to portray himself as a modern-day Robin Hood, as David playing digital dirty tricks on the mighty Goliath.

He left a calling card every timed he hacked: two skulls and the name Kimble. And he patted himself on the back: "I'm smarter than Bill Gates," he said. "I'm going to be one of the richest men in the world."

During the Gulf War, Schmitz broke into the U.S. Defense Department's computer system and, according to him, "found some servers with real time connections to spy satellites' monitoring Saddam Hussein's palace. A BBC report says that Schmitz also succeeded in hacking the account of former German Chancellor Helmut Kohl. He reportedly changed Kohl's credit limit to zero.

Early one morning in 1994, Schmitz got a visit: Munich police raided his apartment. Then 20 years of age, he was held in custody for three months prior to legal proceedings, but then got off with a two-year suspended sentence.

After that slap on the wrist, things went well for Schmitz. Companies courted him, vying with each other to get him on board as a security consultant. Just a week after his release he landed a contract with Lufthansa. He ended up creating a data protection company called DataProtect, 80% of which he was able to sell to the technical monitoring entity TÜV Rheinland before it went bankrupt soon thereafter.

Living large.. and at large

Then Schmitz, apparently converted, changed sides and broke with the hacker scene. He had a large following in the tabloid press. The big fat guy with a $500-million fortune (his estimate) knew how to play to the paparazzi: Schmitz in the arms of a Brazilian babe, Schmitz in his limo with Internet connection, Schmitz with his "friend" Ronaldo, the international soccer star.

A YouTube video shows him at the wheel of a Mercedes doing 200 km/hr as he competes in the "Gumball 3000" running event. The license plate on one of his cars read "God." Other videos showed him bathing in huge marble tubs, on zillion-dollar yachts, always surrounded by luscious bikini-clad women. There were hundreds of manifestations of an enviable luxurious lifestyle: Kim the pop star, Kim the Internet veteran, wanted public recognition and he got it.

After 9/11, Schmitz offered a $10-million reward on the Internet to anyone who provided information leading to the capture of Osama Bin Laden. That initiative did not meet with success, but the same year Schmitz promised the ailing firm letsbuyit.com 50 million euros to get it back on its feet. As news of this spread, it ended up resulting in the biggest turnover ever registered in a single day in the history of the Frankfurt stock exchange. He then sold his shares in the company for a record sum. When the district attorney's office started investigations for insider trading, Schmitz legged it to Thailand.

He was arrested in Bangkok in January 2002 after he announced he would be committing suicide live on the Internet. He was convicted of insider trading and sentenced to a year and eight months of prison. After this, things quieted down around Schmitz, although periodically he announced new projects. His name was first associated with Megaupload in 2007, but it wasn't until 2011 that he was confirmed as its founder.

Going out with a bang

At the time of his latest arrest, Schmitz was living in a $30-million mansion near Auckland. The Coatesville estate was one of the most expensive in the country. He had originally intended to buy it, but some politicians put up resistance to this and in the end Kim Dotcom ended up renting. But he did get a residence permit – apparently after buying $10 million worth of government bonds and giving generously to funds collected for victims of the Christchurch earthquake. For the New Year, he donated the money for a huge fireworks display in the harbor. That made New Zealanders happy, and enabled him to feel like the great philanthropist.

When he was arrested last Thursday, police took possession of objects including paintings and a Rolls Royce Phantom, and money adding up to a total of approximately 3.7 million euros. According to U.S. authorities, Megaupload made more than $175 million in illegal profits and owes damages to the legal owners of the stolen content totaling well over $500 million.

And yet Schmitz received support from a number of stars, including singers Alicia Keys and Kanye West, probably because he had promised that they would each get 90% of earnings on their respective content. In late 2011, Schmitz released a mega-successful ad video for Megaupload featuring many big stars. He himself is also featured singing on the video.

According to the New Zealand police officer leading the arrest, Grant Wormald, when Schmitz realized the police had arrived he tried to hide in a special high-security room inside the mansion and "activated a series of electronic locking systems." After police had "neutralized" him, he tried to barricade himself in the space. Police had to cut their way through the obstacles. "We found Mr. Dotcom in the room near a weapon that looked like a sawed off shotgun."

Megaupload has been taken offline and Schmitz himself may now be out of circulation for some time. If convicted of organized exchange of illegally copied data he could be looking at up to 20 years in prison. Not such a mega outcome.

Read the original article in German

Photo - afpde

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Looking at the Black Sea in Odessa, Ukraine.

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