In an indictment laid down in a Virginia District Court, seven men are accused of committing copyright infringement offences and other crimes such as racketeering.

Police in New Zealand arrested four of the site’s operators yesterday and are searching for the other three men. The US Justice Department has begun extradition proceedings against the men, who said that they have nothing to hide.

The group, led by a man calling himself Kim Dotcom, used megaupload.com and 17 other domains to distribute “many millions” of copyrighted movies, music, games and electronic books, according to US authorities.

In the indictment it says the men allegedly made $175 million in revenues from advertising and premium subscriptions. The main site megaupload.com allegedly had 150 million subscribers and 50 million daily visitors.

The US Department of Justice claims that the men hid the identities of file-sharers and offered financial incentives for subscribers to upload “popular” works. Subscribers could apparently earn $10,000 if they accumulated 5 million reward points.

Although Dotcom’s company Megaupload Ltd was registered in Hong Kong, some of the alleged pirated content was hosted on servers in the US state of Virginia.

In January 2011 FBI agents began working with New Zealand authorities to investigate the site’s operators – based at Dotcom’s mansion in Auckland. In yesterday’s arrest, police seized dozens of goods such as cars, televisions and cameras.

Treaty

Under a treaty signed in 1970 between the US and New Zealand, the men can be extradited for their alleged crimes. The defendants would be the first people to be extradited from New Zealand to the US on copyright infringement charges.

According to the treaty, the men can only be extradited if there is “sufficient evidence” to justify a trial by New Zealand courts. Lawyers at today’s hearing at the North Shore District Court in Auckland said US authorities will have 45 days to file extradition papers.

But Fairfax media in New Zealand said today’s hearing was the first step in a long extradition process that could last at least one year.

CNBC has reported that the defendants have employed an attorney called Ira Rothken – a man well-known for defending web site owners accused of copyright infringement. According to the report, he said: “The government has taken down one of the world's largest storage providers and have done so without giving Megaupload an opportunity to be heard in court.”

After the men were arrested hackers targeted websites belonging to the FBI, US Justice Department, Motion Picture Association of America and the Recording Industry Association of America. Hacking-activist group Anonymous said it was behind the disruption.

The arrests follow a decision by a judge in London last week who said British man Richard O’Dwyer can be extradited to the US on copyright infringement charges. This week, thousands of websites led by encyclopaedia Wikipedia, protested against proposed US legislation to clamp down on internet piracy.

The indictment on the seven men and the two companies that they had registered can be seen here.