Is the Cloud Dead?

January 23rd, 2012
in econ_news

Econintersect:  Did the raid on one company destroy the entire new industry of cloud computing?  This is supposed to be the new best thing since sliced megaupload_logoSMALLbread which would enable isolated computers to share common application programming and file storage facilities making the individual desk top machine a lean, mean processing machine.  The credibility of that entire concept may have been destroyed on Friday January 20, 2012 with the coordinated raid on the biggest file sharing operation in the world,  The company had 4% of the global internet traffic with 50 million visitors daily.

Follow up:

Users may be very reluctant to trust their files to some place out there in a “cloud” if the companies providing the storage could be seized and shutdown in an instant because of some illegal activity occurring in the same remote system.  There have been concerns about security using cloud facilities but until Magaupload, the biggest of the big was seized, protection from losses due to government action were probably not high on the security concerns list.

The problem, of course, was not the huge storage service capability of  The company was a blatant pirate of copyrighted music and was allegedly costing copyright owners half a billion dollars a year in avoided fees. had this to say about the operation:

The Justice Department's whopping 72-page indictment against Megaupload—or as it's tellingly referred to in the document, the "Mega Conspiracy"—illuminates a cavalier operation of opulence, carelessness, and tons of money. The Mega Conspiracy crew—which spanned continents, and was lead by flamboyant fatboy millionaire conman Kim Dotcom—was openly, wittingly rich off of copyrighted music. They were flagrant about their intentions to squeeze cash out of Simpsons episodes and 50 Cent albums, rewarding their most piracy-pushing users, laundering money through the site, and spending the cash in the most conspicuous ways imaginable.

The action came on the day that the fight over the anti-piracy legislation SOPA and PIPA (see GEI News) was temporarily resolved by massive internet protests forcing congress to delay further consideration of the legislation.  Pirated music was one of the reasons that sponsors claimed SOPA and PIPA were needed.  Almost as if in a fit of pique the Department of Justice chose that very day to prove it could do whatever it wanted anyway.

Why can’t the Department of Justice have similar diligence about fraud and theft in the mortgage and banking businesses?  Did Megaupload become a target simply because it had not become big enough to buy a government?

Editor's note: After this was written a post by Washington’s Blog went up asking a similar question and providing some details not covered here.

Sources:, GEI News (SOPA) and GEI News (Bank and Mortgage fraud)

Hat tip to Roger Erickson.

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