Panama Papers Endanger Anonymity of ‘Pirate’ Sites

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Described as one of the largest leaks in history, the Panama Papers reveal where some of the wealthiest people in the world hide their fortunes. However, offshore companies are also widely used for anonymity, as the listing of two Megaupload defendants reveals. This could spell trouble for quite a few file-sharing sites and services that hide behind offshore companies.

megaupload-logoThis weekend an unprecedented database of over 11 million files leaked from Mossack Fonseca, the world’s largest offshore law firm.

The database was initially leaked to the German newspaper Süddeutsche Zeitung by an anonymous source. The newspaper then shared it which the International Consortium of Investigative Journalists (ICIJ), who involved hundreds of journalists around the world.

The reporting thus far has mainly focused on how some of the wealthiest people in the world used offshore companies to launder money and avoid tax. However, Mossack Fonseca is also frequently used as a privacy tool.

This explains why the names of two former Megaupload employees appear in the Panama Papers. As reported by Trouw, early 2010 Dutch programmer Bram Van der Kolk and Slovak designer Julius Bencko started a an offshore company with help from Mossack Fonseca.

Van der Kolk and Bencko are both wanted by the U.S. Government for their involvement with Megaupload. However, their British Virgin Islands-based company “Easy Focus Technology Limited” had nothing to do with the defunct file-sharing service.

In fact, Van der Kolk says that the reason to use an offshore company was to remain anonymous and hide their ties to Megaupload.

“The British Virgin Islands are for companies what Mega is for files: privacy, at least as long as the information does not leak from the trust office!” Van der Kolk says.

The pair didn’t want Megaupload boss Kim Dotcom to know about their side-project, as he might have objected to it. Nothing more than that.

“Not so much because our project was competing with Megaupload or that we could thus spend less time on Megaupload. More because Kim would never allow it in principle, and it would lead directly to an unnecessary escalation.”

This anonymity aspect is also crucial for a lot of names that appear in the Panama Papers. For example, many “pirate” sites use offshore companies to keep the owners out of the public view. This may help to avoid legal issues, for example.

This is believed to be one of the main reasons why several torrent sites, pirate streaming services and file-hosting companies are located in the British Virgin Islands, Cyprus, Jersey, Panama and the Seychelles.

The Pirate Bay’s “parent company” Reservella, for example, is reportedly incorporated in the Seychelles. In fact, during a lawsuit in the Netherlands anti-piracy group BREIN showed evidence (pdf) listing Mossack Fonseca as Reservella’s registered agent.

Interestingly, Mossack Fonseca denied that they had anything to do with the company (pdf), suggesting that the report BREIN produced may have been fabricated.

TorrentFreak spoke with several Pirate Bay insiders who confirm that Reservella should not appear in the Panama Papers, nor do they expect any other TPB-info to turn up from the leaked documents.

Still, the privacy element will certainly have several other “pirate” sites worried that their owners may be exposed in the future. Thus far no public directory of names and companies have been released, but if that happens there is bound to be more panic.

Update: Kim Dotcom informed TorrentFreak that the project of his former colleagues was actively competing with Megaupload, using Megaupload’s source code.

“Bram breached his shareholder and employment agreement and used Megaupload’s source code to start a competing file hoster,” Dotcom says.

“It was a clone of Megaupload with a twist. Bram’s site would re-upload files that were sent to his service to other file hosting sites, including Megaupload and provide his users with over a dozen links to the same file.”

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