Would-be Pirate Bay buyer Hans Pandeya says complications could force him to walk away from his long-shot bid to take over the world's largest file sharing site and turn it legit, barely a week after making a surprise sweetened offer for the company.

In an interview with Wired.com, Pandeya said his overall objective remains unchanged – namely, to morph a file-sharing site into a legitimate royalty-paying business. But he said he might have to pursue another torrent site instead, in the wake of blistering accusations from The Pirate Bay's founders, who firmly state the site is not up for sale.

"The insider [trading allegations], fraud … and pump-and-dump [accusations] … is well above the overkill level now," Pandeya said. "The company is dead, the stock is dead and I am dead even before getting started."

The Pirate Bay has long been a scourge to the copyright industry and a treasure trove to downloaders as the central meeting ground for peer-to-peer sharing of music, movies, software and other files. Although it does not host any content itself, The Pirate Bay makes it easy for people to find files and quickly copy them over the internet. Having thumbed its nose at copyright holders for years, the site finally got its comeuppance when a Swedish court last year found it guilty of copyright infringement.

Shortly after the court ruling, Pandeya negotiated an agreement to buy the site for about $8 million, with a promise to transform it into a legal licensed content distributor. The deal ran into trouble when the Swedish stock exchange AktieTorget delisted his company, Global Gaming Factory X, and he failed to raise the necessary cash in time. The Pirate Bay founders subsequently took the company off the block, and the deal appeared to be all but dead, although an arbitration hearing related to the collapsed transaction is pending in Sweden.

None of these setbacks apparently deflected Pandeya. After a flurry of initial notoriety over the deal, he fell out of the spotlight. But quietly he was putting together the pieces for a second run at The Pirate Bay.

In January, he purchased a tiny, public American company called BMSV that sells racy promotional calendars featuring lingerie models, with the plan of raising $10 million to purchase ThePirateBay.com on June 30 through the sale of stock.

In addition, he recently retained the services of TAG Strategic's Ted Cohen, a music and digital music veteran who attempted similar strategies with both Napster and Limewire in years past.

For their part, the co-founders of the Pirate Bay claim Pandeya has lost his grip on reality, and one person who was formerly involved with the site but no longer wishes to be associated with it told us on background Pandeya would be better off seeking psychological counseling than talking to the press.

However the drama ultimately plays out, Pandeya raises an interesting question: How crazy, really, is the idea of converting The Pirate Bay or something like it into a legitimate service?

Many users of The Pirate Bay already pay a $6 monthly fee to hide their IP addresses so as to escape legal scrutiny. Pandeya's idea, which makes sense at least in theory, is to charge users a similar fee to access the site and disburse the money to copyright holders, who would in turn license that behavior. After all, these users are already paying monthly fees, just not to copyright holders.

Cohen, Pandeya's veteran advisor, remains optimistic that a deal could be worked out because record labels' and movie studios' attitudes towards online distribution have changed over the past decade.

"Ten years ago, I went through this [with Napster] – there should be a way to pull this off," Cohen told Wired.com on Friday. "If the industry wasn't ready ten years ago , I think they are possibly ready for it now.

"If you can convert 30 percent of [The Pirate Bay users to a paid subscription], everybody sees the wisdom in that now, more-so than they did two or three years ago," Cohen said. "I don't think it's a fool's quest."

The biggest challenge may not be building a convincing business model. Rather, it is likely to be resistance form content owners unwilling to license their content to a company whose mission has been to overtly promote piracy by challenging the legal framework of copyright protections through the blunt application of technology.

"I think there's going to be significant brand challenges for people with tier-one entertainment brands to be positioned anywhere near a brand like The Pirate Bay," said Ashwin Navid, co-founder of Bit Torrent, Inc., who with bit torrent creator Bram Cohen, pursued (then abandoned) a similar strategy, beginning in 2004.

"It was a serious challenge for Bit Torrent when we did the license agreements, and it's proving difficult for a lot of other companies in a similar space. For example Boxee has a hard time, DIVX has a hard time – these companies that have pushed the envelope on copyright tend to get categorized as renegades, and the lawyers have a hard time – and the [entertainment] brand managers have a hard time – embracing those brands."

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Photo: Flickr/Fores