Megaupload was a file hosting service run by Megaupload, Ltd, a Hong Kong-based company founded in 2005 by Kim Dotcom. On 19 January 2012, the United States Department of Justice shut down Megaupload and its sister services, freezing approximately $42 million in associated assets and arresting the site's owners on charges of copyright infringement.
Megaupload was founded by Kim Dotcom in Hong Kong in September 2005, originally a company called Data Protect Limited. The site enjoyed a rapid rise to success, as did Dotcom and his partners. Megaupload's offices were located in Wan Chai, Hong Kong. At the time of the U.S. Department of Justice raid on Megaupload, the company was renting an office in a luxurious Hong Kong hotel that cost nearly $13,000 per day. Dotcom announced in September 2012 that he would be launching a new Megaupload service, 90% finished at the time, later that year despite ongoing legal proceedings. 
Megaupload was merely one of many services offered by Megaupload, Ltd. Megaupload had five partner services, with two more in development at the time of the raid.
- Megaporn.com was a file-sharing service specifically geared towards pornographic material.
- Megabox.com was a file-sharing service that allowed for playlist and library sharing.
- Megalive.com was a live video-streaming service.
- Megapix.com was an image-hosting service.
- Megavideo.com was a video-hosting service.
- Megabackup.com (in development)
- Megamovie.com (in development)
Within the Megaupload site, users could choose to either pay a membership fee or access the site for free. Members enjoyed higher download speeds, concurrent downloads, and limited wait times between downloads, whereas these capabilities were highly limited for free users. Membership fees accounted for an estimated $150 million in Megaupload's earnings.
At one point in its operation, Megaupload was the 13th most frequently visited website on the Internet. Throughout its history, it had more than one billion visitors with 180 million registered users, storing 25 petabytes of data. Megaupload is estimated to have been responsible for approximately four percent of the traffic on the Internet, with an average of 50 million daily visits and over 1 billion total page views. 
The United States Department of Justice seized Megaupload on 19 January 2012, shutting down the site and its associated services and arresting the owners. Four Megaupload executives, including Dotcom, were arrested in New Zealand the following day following an extradition request from the Federal Bureau of Investigation.
Kim Dotcom was released on bail on 22 February 2012 after being denied bail by two different judges. The decision was made by North Shore District Court Judge Nevin Dawson, and justified by the fact that Dotcom no longer posed a significant flight risk due to the seizure of his assets.
On 28 June 2012, New Zealand High Court judge Justice Helen Winkelmann ruled that the search warrants executed on Kim Dotcom's private home were invalid because they "did not adequately describe the offenses to which they related".
Extradition proceedings for the arrested Megaupload employees, including Dotcom, were delayed until March 2013 on 10 July 2012 in order to allow for more time to see legal arguments through.
In lieu of the shutting down of the website, various superstars came out in what seemed like support of Megaupload. Artists consisted of Kanye West, Will.i.am, Diddy, Alicia Keys, and Snoop Dogg. Although the website has been known for file sharing, these artists remained in support of Megaupload. The video has since been removed. 
Following the seizure of Megaupload's servers, users expressed concerns regarding the fate of files uploaded to the website, including those that did not infringe copyright. Megaupload sought to regain control of their servers following the raid through a deal with their ISP, Carpathia Hosting, allowing them to purchase them, but the freezing of Megaupload's assets prevented the purchase from being made. Carpathia expressed concern over the status of the servers, as maintaining the 1,103 servers that Megaupload leased while legal proceedings took place cost thousands of dollars per day.
The United States government protested against Megaupload's plan to save their servers, maintaining that the data should be erased. Megaupload responded by pointing out that erasing the data on their servers would deny them the opportunity for a fair trial, as the contents of said servers could be misrepresented by the government in order to gain a stronger foothold against the company.
Kyle Goodwin, a videographer from Ohio, teamed up with the Electronic Frontier Foundation to attempt to force the government's hand in returning data that he had stored on Megaupload's servers. The EFF points out that government seizure of property requires extra care when third parties are involved, and argues that the seizure of digital goods should be governed by similar laws and guidelines as the seizure of more tangible goods. 
Since Megaupload's shut down earlier this year, there have been many rumors of a new file sharing site that would succeed Megaupload. Nothing was set in stone until in October of 2012 when Kim Dotcom announced the creation of Mega, a new file sharing site that would bigger, better, and raid-proof. Coders have been working for months before this announcement and according to Dotcom, "It’s special because seven years of experience have been turned into the perfect cloud storage solution. It scales infinitely. It provides up- and download acceleration and resume in the browser thanks to the latest HTML5 technology." This new site is set to be released in January of 2013. In November of 2012, the domain registered by Dotcom for Mega, me.ga, was shut down immediately by the government of Gabon, who control the .ga domain. Dotcom blamed the shutdown on the "reach of the US & Vivendi".
Since Mega's announcement, Kim Dotcom, through the use social media outlets like twitter, has been providing teasers to the hundreds of thousands or even millions awaiting the launch of Mega in just one month. To the right is a screenshot of the file manager for the new site. 
Kim Dotcom has revealed that a new key feature difference for Mega, is a new client-side encryption interface that will encrypt files using the AES Algorithm before uploading to Mega. Though there will be advanced security, the code will be based on open source. Dotcom has told TorrentFreak that, "File transfers and storage are encrypted with military strength and you don’t have to take our word for it, that part of the code is open."
The picture to the left is a screenshot uploaded by Kim Dotcom. As quoted by Kim on his Twitter account, "Mega Will Turn Encryption into a Mass Product". He believes that mass-encryption will help keep the people's privacy safer and is hoping that with Mega's help, over half the information/traffic on the internet will be encrypted within five years. The client-side encryption will be similar to products like Dropbox. The files uploaded will only be accessible to the user who uploaded the file but allow files to be shared with anyone who has a link. Dropbox and other similar sites enforce traffic limits to ensure only sharing to friends and family. But unlike other client-side encryption sites, Mega will allow an infinite amount of sharing.
The primary ethical issue involved is the morality of filelocker websites like Megaupload, which allow users to upload content without any strict oversight. The complex legality of these sites is a reflection of this underlying moral complexity. This issue is similar to the issue of web host responsibility, the idea that companies who offer web hosting have a moral obligation to ensure that their customers are not using their servers to violate the law. However, there is also the view that web hosts, and similarly the owners and operators of filelocker websites, are not obligated to accept this responsibility because they do not claim to.
Further, in Megaupload's specific case the issue of government oversight is crucial. The government of New Zealand admitted to illegally monitoring Dotcom and his communications for weeks leading up to the raid on his property.  The United States Department of Justice's freezing of Dotcom's assets raises even further questions, as Dotcom is a citizen of New Zealand and not the United States. Regardless of the moral truth of Dotcom's actions, this trend of overreaching government power points to the possibility of forced responsibility for website operators by the governments of not only the nation of their citizenship but of nations where they are not citizens.
Copyright issues have long existed before the Internet days. However, with the introduction of the Internet, it has been much easier for users to pirate information. The main issue with illegally downloading things from the Internet is that everyone assumes that everyone else does it. People know it's wrong, but if everyone is doing it, so can they. In one professor's case, his students said "they would not have bought the music or book anyways, so they were not harming anyone."  At one point the United States legislation considered enacting bills to stop Internet piracy. The bills stated that violations on the Internet cost the United States 100,000 jobs. However, opponents refuted that the laws would reach far beyond sites like Megaupload, and would make massive online-distributing companies like Google and Youtube liable for copyright infringement. It would also allow the government full autonomy to block access to Web sites that it deems to be contributing to copyright infringement. As of now, the US congress has shelved its anti-piracy legislation, but the debate is still ongoing.
- Huffington Post. December 12, 2011. Megaupload Music Video
- Dotcom: Illegal spying revealed, NZ Herald 24 September 2012