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Users who used Megaupload's services legitimately, by sharing files that they have permission to share, are angry at the fed's pre-emptive closure of the file hosting service, leaving them without ways to recover their own files, and leaving paying subscribers without any ability to seek a refund. And a shockwave has been sent through the cloud storage industry, which includes the likes of Apple and Amazon, about the potential consequences of the Megaupload seizure, and what it means for their own business models.

Federal prosecutors ordered the closure of Megaupload, and seizure of assets on Thursday in a multi-national operation that included arrests and seizures in New Zealand, as well as the Netherlands. Megaupload allows users to upload files, and generates an unique link for each upload that can be shared with anyone. Federal prosecutors allege that Megaupload profited from web piracy by allowing users to share large quantities of copyrighted files, and rewarded major uploaders via their affiliate program.

But after the seizure, customers of Megaupload that had used the service legitimately expressed their shock and anger at this latest development. Talking to Ars Technica, Michael Weinberg of the D.C. base non-profit public interest group Public Knowledge explained how the group used Megaupload to distribute videos produced by the group, preferring Megaupload to other similar service due to the ease of uploading new content. "I like sites like Megaupload because they do not require an account - you just upload it, get the link, and send it out. It is also easy to tell other people to use it because you do not need to make a new account," explained Weinberg.

Software developers also use Megaupload to distribute files that would normally be expensive to distribute via their own file hosting setup. "I've used Megaupload for distributing betas of my app Sleepy before publishing it on the Android Market. It was quick and easy to upload and share things," Android developer Massimiliano Fanciulli explained.

With the record industry's copyright lobby, the RIAA, no doubt fully behind the closure of Megaupload, independent musicians that used Megaupload's service legitimately are also now hurting. Suzanne Barbieri, a professional musician, wrote in to Ars Technica to express her confusion at the closure of Megaupload, and what it means for her projects. "A Megaupload free account allows you to send files of up to 2GB. I have no idea where I will upload files now," Barbieri wrote, referring to Megaupload's generous file size limits that are not available from other file sharing services.

While most users affected by the Megaupload closure do have local copies, some that did not are now seriously worried about the prospects of recovering their files. But the Justice Department was not sympathetic to these legitimate user's needs, stating that users should "assume the full risk of complete loss or unavailability of their data". Those that paid for Megaupload subscriptions for legitimate purposes are also now without recourse for a refund, the money paid will most likely be handed over to Hollywood and the music industry, and other content owners whose content Federal prosecutors allege that Megaupload helped to "steal".

This has led critics to argue against the criminal proceedings and the closure of Megaupload without the government having proved any part of their case in court. With a civil proceeding, the plaintiffs could apply for a temporary injunction against Megaupload, and the time it would take for the court to hand down a decision could be just enough time for users to recover their files, or seek a refund.

The handing down of criminal charges is also sending shockwaves through the online storage industry. With experts agreeing that the Megaupload indictments could be the government's way to send a warning to the industry, about the need to examine the legality of their business model, many are doing just that. Or at the very least, destroy email records that may prove incriminating if any charges were to arise.