Kim Dotcom
Kim Schmitz aka Kimble (born January 21 1974 in Kiel) is best known as Germany's first high-profile hacker, although he has long since ceased hacking and become a successful entrepreneur.
Early career
Schmitz was born to working class parents in the northern German city of Kiel and showed an early aptitude for computers and computer games, to the point where he became “addicted” to the technology.
A self-confessed “drop out” student, he was blessed with an entrepreneurial drive and rapidly moved from playing computer games to cracking them and selling copies to his classmates and other children.
Schmitz soon realized that he needed quicker, cheaper access to the latest computer games from the United States rather than relying on the traditional airmail service.
As a result, he became one of the first hackers in Germany to transfer computer games by phone and remove the copy protection before making mass copies and delivering them to his customers.
However, phone calls were expensive and it took hours to transfer one game, so Schmitz used blue-box “phone phreaking” to crack the international telephone companies’ lines acoustically and obtain as much free telephone time as he needed on as many lines as he needed.
The same skills enabled the 15-year-old Schmitz and hundreds of other German hackers to then begin hacking company computer systems, looking for PBX system access codes to crack and thus take advantage of lax security to utilize international toll free numbers for free calling.
Part of the German Bulletin Board System (BBS) scene with his own House of Coolness BBS, his victims included public utility companies and banks making the transition from analog to digital technology.
The German hacking community found a ready market for its blue-box frequencies that enabled users to make free phone calls, so much so that Schmitz dropped out of school at 17 and moved to Munich, where he met similar computer-literate people. Business was so good he stopped going to school.
References [1]- [10]
DataProtect
Schmitz then began developing more legitimate computer-based businesses such as security company Data Protect, which tested organisations’ vulnerability to hackers by analyzing their networks using hacker methods and issuing security certificates.
He also began living an extravagant and flamboyant lifestyle that made him famous throughout Germany but enraged the underground German hacking community. The hacking community was also infuriated by his habit of making the latest hacking developments public, with his publication of technical details on phone phreaking earning him top spots on the “Most Hated Person” charts in the Worldcharts diskmag for several years.
Schmitz gained further extensive publicity in the late 1990s through his claims to have broken into several high-profile organizations such as NASA, Citibank and the Pentagon.
However, his hacking career came to an end in 1994, when he spent two months in prison before being released pending trial for computer fraud and subsequently convicted four years later.
On March 23 1998, Schmitz was sentenced to two years on probation for computer fraud: he had hacked into a large number of X25-connected corporate and government computer systems and abused international telephone services.
His ownership of Data Protect was a contributing factor in the court’s decision not to sentence Schmitz to more jail time, although he sold 80% of the company in 2000 to German government non-profit certification organization TÜV Rheinland, which renamed Data Protect to TÜV SecureIT in 2001.
References [11 ] – [14]
Other Businesses
That same year Schmitz bought US$375,000 worth of shares of LetsBuyIt.com, which was almost bankrupt and in moratorium. He had been impressed with the potential of the ingenious business model, which enabled lots of individual buyers to get together and negotiate big discounts with manufacturers and suppliers.
He subsequently announced his intention of investing EUR50million in the company, creating the biggest single-day rise of a share price in the history of the German stock market.
He reaped a profit of US$1.5 million but was arrested in Bangkok, Thailand in January 2002 and sentenced to a probationary sentence of 20 months and a EUR100,000 fine in 2001.
His legal team maintained that this was not insider trading as the information did not come from anybody else and Schmitz had created the business opportunity himself and that having already bought the shares he decided to sell them once they were out of moratorium.
Schmitz also arranged and obtained an unsecured loan of EUR 280,000 from Monkey AG, where he was chairman of the board, to be paid to his personal company Kimvestor AG in 2001.
Both companies went bankrupt soon after, and Schmitz pleaded guilty to embezzlement in November 2003 and received a sentence of two years on probation.
He claimed in his defence that he did not know he was doing wrong as he was the 100% shareholder of both companies and didn’t understand the legal ramifications of his actions.
Financing dried up following the LetsBuyIt insider trading case so Schmitz moved to Sydney and on to Dubai, where he developed the Trendax fund trading software that he then tried to launch in Hong Kong.
Unfortunately, adverse media attention regarding his past activities meant it was impossible to raise funds to float the company, but Schmitz has since bounced back and is currently active in several Internet businesses while also researching fresh business opportunities.
Reference [15] – [21]
Lifestyle
Schmitz has always had a flamboyant lifestyle, which has been reflected in his business promotion activities that saw him appear on talk shows to explain his philosophy and run big television advertising campaigns. Coming from a hard working, middle class family, which did things in moderation, drove him to seek luxury and glamour.
A near-fatal car crash in 1997 proved an awakening, following which he decided to “live life to the fullest” and collect as many lifestyle experiences as possible.
He subsequently travelled the world with several close friends and owned numerous planes, boats and cars, which led to media attention that he frankly admits he found addictive.
Few German public figures before or since have lived such a flamboyant lifestyle.
Two years later there was a report that he had offered a US$10 million reward for the capture of Osama Bin Laden. “That was merely an off-the-cuff response said in jest to a casual enquiry by a journalist that was blown out of all proportion by the media,” Schmitz claimed.
Since his legal problems Schimtz has kept a low profile and is living a “quiet life” with his wife, son and daughter while remaining actively involved in various philanthropic activities.
Reference [22] – [24]
Other activities
Schmitz displayed a Mercedes S-Class equipped with a 16-channel GSM multi plexer for in-car Internet access and video conferencing at CeBIT 1999 in Hannover.
The Megacar concept and all the technology were subsequently sold to IVM Automotive in Munich and they have continued to develop solutions with Daimler Chrysler for Mercedes-Benz and other cars.
Schmitz was also active in the street racing scene and participated in the Gumball 3000 rally several times, finishing first in the six-day, 3,000-mile event in 2001 and 2004.
He also tried to organise a street race called the Ultimate Rally in 2006 with a longer track in countries such as Morocco but legal and political issues forced him to abandon the project. Becoming a father also influenced his decision to retire from his racing career.
Entrance money for the Ultimate Rally was refunded and the concept has been sold to a US investor who plans to introduce it when economic conditions improve.
Schmitz, who has also long been a fan of Formula I and organised several big parties for the races in Monaco, now plans to develop a racetrack.
Reference [25] – [29]
References
1- Forbes: THE HACKER HOOD 01/92
2- Wirtschaftswoche: HACKER IM HANDY 09/96
3- SPIEGEL: WIE UNTER DROGEN 10/96
4- VDI nachrichten 09/98: Vom Saulus zum Paulus
5- c't 4/1999: Offen für alles - Lauschangriffe auf und über ISDN
6- FINANZEN 11/1999: Das Super-Hirn
7- Capital: GANOVENTRICK MIT GARANTIE 08/92
8- loaded, Nice work if you can get it Kim Schmitz, May, 2001: Kim Schmitz
9- Berliner Morgenpost v. 12.2.2001: Der 500-Millionen-Mark-Mann
10- Los Angeles Times, February 18, 2001: Ego-Trip Through Cyberspace Yields Riches
11- Funkschau 08+10 / 98: Data Protect: Sicherer Netzwerkzugang mit Handy
12- BUNTE 32/1999: Jung & clever: Reich
13- Focus 20/2000: Vom Hacker zum TÜV-Checker
14- Handelsblatt, Kimvestor bringt den TUV in Erklärungsnot, Feb 6, 2001
15- Financial Times, January 27, 2001 - Hacking a way to wealth via jail
16- Sunday Telegraph, January 28, 2001 - From convicted hacker to dotcom backer
17- Tornado Insider, April, 2001: Kim Schmitz - the entrepreneur as naughty schoolboy
18- Der Aktionär 8/2001: Kim Schmitz - Das Interview
19- Der Speigel, Haftstrafe fur Schmitz? Jan 28, 2002
20- Manager Magazin, November 11, 2003
21- Business Week, Luring investors back into the pool, April 12, 2004
22- Bild v. 08.12.2000: Ein deutsches Hightech-Märchen
23- Los Angeles Times, February 18, 2001: Ego-Trip Through Cyberspace Yields Riches
24- Next Magazine HK 27/09/2001: Kim Schmitz
25- Handelsblatt 17.3.1999: Die jungen Wilden im Cebit-Zirkus
26- Online Today 6/1999: Das Auto der Zukunft
27- Tomorrow 7/1999: Bei Tempo 280 ins Internet
28- Lufthansa Magazin 9/1999: Die Zukunft auf Rädern
29- BusinessWeek Europe, April 10, 2000: Digital Wheels