PayPal has pulled support for Kim Dotcom's Mega.
Dotcom claims the decision was made following pressure on Paypal from Visa and Mastercard.
Paypal, Visa, and Mastercard have been contacted for comment.
In a statement Paypal refused to elaborate on the grounds of customer privacy saying only that it terminated the relationship “for business reasons".
“I like to thank Paypal for backing Mega for such a long time,” Dotcom says in a tweet.
“The pressure from Hollywood and the US Government was simply too much.
Dotcom thanked PayPal for providing a means for some of its 15 million users to buy its premium one-terabyte storage services.
Mega claims US Senator Patrick Leahy pressured PayPal after encountering a report lambasting the cyberlocker as a piracy haven. Mega says the Senator then urged the credit card companies to sever ties with it and other cloud storage entities including 4Shared and RapidGator.
“Mega is aware of a report published by NetNames (partially funded from the MPAA supported Digital Citizens Alliance) that incorrectly claims Mega's business to not be a legitimate cloud storage service,” the company said in a statement.
“MEGA is aware that Senator Leahy then pressured Visa and MasterCard to cease providing payment services to the companies named in that report.”
Mega says it shared “extensive statistics” with PayPal in an attempt to show it is a legitimate business.
According to Mega this satisfied the payments company until it later made a “non-negotiable” decision to immediately cut ties based on its use of encryption. Here's what Mega has to say about the situation:
PayPal has apologised for this situation and confirmed that Mega management are upstanding and acting in good faith. PayPal acknowledged that the business is legitimate, but advised that a key concern was that Mega has a unique model with its end-to-end encryption which leads to 'unknowability of what is on the platform'.
The Digital Citizens Alliance report (pdf) claims the lion's share of content hosted on cyberlockers including Mega is pirated, based on analysis of 500 files referenced in public hyperlinks. That analysis appears flawed since excludes the unknown portion of the four billion files hosted on Mega servers, such as family photos, which users would not openly share.
"Until new payment systems are implemented, MEGA will temporarily not enforce its storage limits or suspend any accounts for non-payment, and has extended existing subscriptions by 2 months free of charge," Dotcom's storage site added. ®