Kim Dotcom turns on Mega – and CEO responds to savaging

There's more trouble at the mill.

Mega has recently been in the news after PayPal's departure left it paymentless, and it finally abandoned its controversial back-door listing on the NZX.

Now it has been forced to defend itself after a slagging from founder Kim Dotcom.

A Q&A with Mr Dotcom just posted to the popular US site Slashdot includes the following exchange:

Q: I've seen some criticism from open source advocates and hackers that Mega can't be trusted because the source isn't available.What assurance could you give someone to the point that their files may not be kept secret while hosted on your platform?

Dotcom: I'm not involved in Mega anymore. Neither in a managing nor in a shareholder capacity. 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 NZ government. Which means the NZ government is in control. In addition Hollywood has seized all the Megashares in the family trust that was set up for my children. As a result of this and a number of other confidential issues I don't trust Mega anymore. I don't think your data is safe on Mega anymore. But my non-compete clause is running out at the end of the year and I will create a Mega competitor that is completely open source and non-profit, similar to the Wikipedia model. I want to give everyone free, unlimited and encrypted cloud storage with the help of donations from the community to keep things going.

Additionally, Mr Dotcom posted a picture to Twitter of Mega investor William Yan (also known as Citizen Yan or Bill Liu) with the caption "Mega is in deep water." On November 20 last year, police seized $40 million of Mr Yan's assets, including his Metropolis apartment, a Mercedes-Benz, cash in bank accounts and his 18.8% stake in Mega. Mr Yan's frozen Mega shares are held by Auckland law firm Jesse & Associates. 

Jesse and Associates principal Jesse Nguy represents Zhao Wu Shen, who until this month was Mega's largest shareholder, with a 25.9% stake. Mr Shen transferred his holding to Beijing-based Li Zhi Min on July 10 (Mr Shen and his partner Susan Chou – both large National Party donors – were recently in the news after selling $26 million worth of property in Auckland).

In a statement sent to NBR this afternoon, Mega CEO Graham Gaylard disputes Mr Dotcom's take on events.

"More than 75% of shareholders have supported recent equity issues, so there has not been any ‘hostile takeover,’ contrary to Mr Dotcom’s assertion," he says.

"Those shareholders who have decided not to subscribe to recent issues have been diluted accordingly. That has been their choice."

The 6% shareholding held by the Dotcom family trust (which is controlled by Mr Dotcom’s estranged wife) 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. That is a matter for the Dotcom family trust and does not concern Mega, Mr Gaylard notes. "The authorities responsible for maintaining the order have not opposed or interfered in any of Mega’s operations."

Mega is not party to any court proceedings involving Mr Yan or Mr Dotcom, Mr Gaylard says.

Mr Dotcom resigned as a Mega director in October 2013 and has had no managerial input since that time, Mr Gaylard says. Neither was Mr Dotcom involved in the design or implementation of Mega's technology.

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