Mega says Kim Dotcom claims of hostile takeover are 'defamatory and self-serving'

Mega, the cloud storage service, has said claims by its co-founder Kim Dotcom that it is no longer trustworthy and was subject of a hostile takeover by a Chinese investor wanted for fraud are "defamatory and self-serving". Kim Dotcom, the internet entrepreneur who is wanted in the United States to face charges of copyright infringement relating to his now defunct Megaupload service, made a number of claims in a question and answer session on the website Slashdot.

In response to a question about the security of cloud storage service Mega, which he co-founded in January 2013, Dotcom said he was no longer involved with the company either as a shareholder or director, adding: "The company has suffered from a hostile takeover by a Chinese investor who is wanted in China for fraud. He used a number of straw-men and businesses to accumulate more and more Mega shares. Recently his shares have been seized by the New Zealand government."

Dotcom said he no longer trusted Mega and would be creating "a Mega competitor" once his non-compete clause runs out at the end of 2015. Dotcom promised it would be "completely open source and non-profit, similar to the Wikipedia model".

In response to his claim, the board of directors of Mega issued a statement hours later categorically denying the claim, and calling Dotcom's remarks "defamatory" and "self-serving": "Mega views Mr Dotcom's defamatory comments as self-serving and designed simply to spruce his supposed new business venture. They are inconsistent with his previous desire to ensure that the shareholding in Mega remains a valuable asset for his children and reflect just how completely Mr Dotcom and Mega have now moved apart if he can make such an unwarranted and irresponsible, defamatory attack."

Shareholder

The statement, emailed to IBTimes UK, also seeks to outline exactly what is happening at the company in relation to its shareholders: "Like all start-up companies, Mega has had several rounds of equity investment. More than 75% of shareholders have supported recent equity issues, so there has not been any 'hostile takeover', contrary to Mr Dotcom's assertion. Those shareholders who have decided not to subscribe to recent issues have been diluted accordingly. That has been their choice."

Relating to the claims of the shares being seized by the New Zealand government, Mega's board said that two other shareholdings totalling 7% are subject to a "restraint ordered by the New Zealand High Court in August 2014" adding that this was a matter "for that investor and does not concern Mega".

The board also said that Dotcom's 6% shareholding in the company was held by the Dotcom family trust and is currently "subject to a freezing order issued by the New Zealand High Court on an application by five Hollywood film studios in November 2014".

Dotcom has since responded to this statement by saying on Twitter that he would be publishing a "details statement" on Monday (3 August) about the status of Mega adding "then you can make an educated decision if you still want to use it".

The board of directors' statement went on to address the issue of security and trust in Mega by saying it has published some of the service's source code on Github already and plans to publish the other applications including its mobile application, soon. "Mega's encryption code has been examined by various international experts including the Spanish National Cybersecurity Institute without any flaws being found."