Two men who helped run the once wildly popular pirating website Megaupload have each been sentenced by a New Zealand court to more than two years in prison. The sentencing of Mathias Ortmann and Bram van der Kolk ended an 11-year legal battle by the men to avoid extradition to the United States on more serious charges that included racketeering. The sentencing came after the men struck a deal last year with prosecutors from New Zealand and the U.S. Kim Dotcom, the founder of Megaupload, is continuing to fight the U.S. charges and threat of extradition. He has said he expects his former colleagues to testify against him as part of the deal they struck.
It looks like they were charged in the US. I didn’t see with what specifically but the US sentenced them to prison for about a year and they elected to do their prison sentence in NZ (which is allowing one of them to wait until the birth of their child before beginning their sentence). It looks like NZ’s role in this isn’t harmful (besides allowing foreign search of their home)
So it is harmful.
Even in the US there’s no law against hosting encrypted files. They could be liable if they knew a specific file was illegal/pirated and didn’t take it down but a recent SCOTUS case (think it was Twitter v Taamneh) set the precedent that general knowledge of illegal activity is not enough.
I don’t think the original MegaUpload site hosted encrypted files, at least not in a zero-knowledge way. They also encouraged users to do things like upload their entire music libraries and had a searchable database of them called Megabox. They weren’t just a file hosting provider, they were in many instances encouraging their users to upload pirated content and had all of the tools to see what was being uploaded and what was infringing.