Kim Dotcom's Mega fileshare site struggles under massive demand

Indicted Megaupload founder Kim Dotcom admits his new file-sharing site is struggling to keep up with massive demand.

Dotcom launched the "Mega" site with a lavish party on Sunday, the anniversary of his arrest on racketeering charges related to his now-shuttered Megaupload. Dotcom says 500,000 users registered for Mega within 14 hours.

On Tuesday, Dotcom apologized on Twitter for "poor service" and said the launch party - which featured a reenactment of last year's police raid on his mansion - led to huge publicity and huge demand.

"Lesson learned... No fancy launch event for Megabox," Dotcom tweeted.

Dotcom is touting Mega as a "privacy company," claiming that because users hold the decryption key Mega cannot see what files are being shared. Dotcom argues that the company can't be liable for content it cannot see.

"If someone sends something illegal in an envelope through your postal service," he says, "you don't shut down the post office."

Heavy demand may not be Dotcom's only problem. A recent report by the blog Tech Week Europe alleges that Mega has "a host of security vulnerabilities." According to Alan Woodward, professor at the University of Surrey, the problem is the Mega is encrypted through Javascript in the browser and anyone who can "break the SSL encryption could get hold of the keys," the blog reports.

Dotcom denies the reports of security flaws in Mega and tweeted: "There have been a few wrong reports about our encryption & security. Expect a blog post on #Mega later today."

Dotcom plans to launch his Megabox music service in about six months.

U.S. prosecutors accuse Dotcom of facilitating massive online piracy with Megaupload. Dotcom says he's innocent and remains free on bail.