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Kim Dotcom opens $7m crowdfunding bid for Megaupload 2.0 and Bitcache

Accused pirate seeks investment for new enterprise valued at $140m, with a Cook Islands company in the frame.

Fri, 07 Oct 2016

Kim Dotcom is seeking $7 million through a Cayman Islands-registered crowd-funding site called BNK to the Future – but key elements of the project are unexplained.

The funds are for two new initiatives: “Megaupload 2.0” (described as like Dropbox but with end-to-end encryption) and Bitcache, a micro-transaction technology based on the digital currency Bitcoin, which will be used for Megaupload 2.0 payments.

People who want to take part in the crowd-funding have the choice of becoming a "backer" (donating cash in return for a reward, presumably use of the services being created by the project), or an investor.

Investors are asked to use Bitcoin only.

The minimum investment is the equivalent of $US1000.

The calculator on the Megaupload 2.0/Bitcache project page says this will buy you a 0.001% stake in the new venture.

A $US1 million investment will buy you a 1% stake, implying a total value of $US100 million ($NZ140 million).

The project page went live today. It says so far $NZ540,000 has been raised from 89 backers.

The minimum investment goal is $1.4 million.

Where’s the money going?
The Megaupload 2.0/Bitcache project page declares that “Due to his ongoing legal disputes with the US government, Kim Dotcom is not the owner of the companies [sic] but the company’s [sic] evangelist.”

But who exactly owns the company (or companies) concerned is not clear.

A new company, Bitcache Ltd, has been created for the crowdfunding project.

Companies Office records show it is 100% owned by the Cook Islands-registered MC2.

Mr Dotcom did not immediately respond to NBR’s question over who owns MC2.

A 40-page "Constitution of Bitcache" document accompanying the offer makes only a single reference to the Cook Islands company, which is referred as "The Founder."

Phil Creagh and Jeffery Lai (both directors in Anderson Creagh, the law firm assisting Mr Dotcom with his extradition appeal) are listed as “team members” on the Megaupload 2.0/Bitcache project page. So are Anderson Creagh associate Chris Nixon and Marco Oliveira, the Portugal-based chief technology officer for Mr Dotcom’s failed Baboom venture.

Been here before
Keen Dotcom followers will find the Megaupload 2.0 business case familiar. It’s essentially his pitch for Mega (launched in 2012) but with Bitcoin used for payment.

Mega claims millions of users but has been unable to collect revenue from its premium subscribers since PayPal (apparently egged on by MasterCard and Visa) withdrew payment services in 2015 [UPDATE: it has now introduced Bitcoin and other payment alternatives.]

A second challenge has been the falling out between Mr Dotcom and others involved in the site. The German has gone from evangelist to publically slagging off the service.

A third has been New Zealand's Telecommunications (Interception Capability and Security) Act or "TICS" and similar legislation passed around the world. TICS requires companies to make online services interceptable. 

An attempt to reverse-list Mega on the NZX in 2014 and 2015 failed, in part because of bad publicity generated by Mr Dotcom's choice of partner: TRS Investments, a shell company whose majority owner, Paul Choiselat, faced multiple market manipulation charges brought by the Australian Securities & Investments Commission. 

The Megaupload 2.0/Bitcache project page also fails to mention another Dotcom project since his arrest, the music-sharing site Baboom whose bid to raise $A4.5 million across the Tasman in a "pre-IPO" capital raise was ultimately abandoned after several deadline extensions. 

Kim Dotcom and his Megaupload co-accused lost their extradition case in December 2015.

A month-long High Court appeal hearing wrapped up September 28. Justice Murray Gilbert has yet to rule on whether the defendants have a case to answer on copyright, racketeering and money laundering charges.

After Justice Gilbert delivers his ruling, the losing side will have the option of taking the case to the Supreme Court.

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Kim Dotcom opens $7m crowdfunding bid for Megaupload 2.0 and Bitcache