By Brendan Sasso - 01/19/12 08:32 PM EST
The Justice Department seized Megaupload.com, one of the world's most popular file-sharing sites, and several of its related sites on Thursday.
Prosecutors charged seven employees of Megaupload with criminal copyright infringement, conspiracy to commit racketeering and other charges.
Each faces up to 55 years in prison.
The crackdown comes just one day after a massive Web protest against legislation to expand the power of law enforcement and copyright holders to go after infringing websites.
Prosecutors accuse Megaupload's owners of generating more than $175 million in criminal proceeds and more than half a billion dollars in harm to copyright owners.
The authorities seized 18 domain names related to Megaupload and $50 million in assets.
New Zealand police arrested four of the alleged Megaupload employees in New Zealand on Thursday at the request of U.S. officials. Three of the alleged employees remain at large.
Megavideo allowed users to watch 72 minutes of video for free after first viewing an advertisement. Premium users could watch unlimited amounts of video.
According to the indictment, the employees selectively complied with requests from copyright owners to remove infringing content. They would often remove a single link to an infringing video while leaving the actual video in place, according to court documents.
Prosecutors accuse the defendants of illegally hosting movies including "Thor," "Bad Teacher" and movies in the "Lord of the Rings," "Twilight" and "Harry Potter" franchises. Some of the files were uploaded just days after a film's theatrical release, according to prosecutors.
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Although law enforcement can seize U.S. sites for failing to comply with copyright law, they have little power to shut down foreign sites with no U.S. assets. The proposed Stop Online Piracy Act (SOPA) and Protect IP Act would empower the Justice Department and copyright holders to force U.S. search engines to delete links to the infringing sites.
Web companies argue the bill would stifle innovation and censor speech by forcing sites to police user-generated content.
Sen. Patrick Leahy (D-Vt.), sponsor of the Protect IP Act, applauded the crackdown but said new tools are needed to go after foreign sites.
“Today’s action by the Department of Justice against the leaders of MegaUpload.com shows what law enforcement can do to protect American intellectual property that is stolen through domestic websites. Unfortunately, there are no tools in the arsenal to protect that same American intellectual property from theft by websites hosted and operated overseas," Leahy said in a statement.
"Why should we give greater protections to criminals engaging in the same conduct overseas? Meaningful legislation to stop online infringement and piracy by foreign rogue websites will protect American workers, American consumers and America’s economy.”
This story was updated at 4:21 p.m.