Federal prosecutors say data from users of Megaupload could be deleted as soon as Thursday.
U.S. prosecutors blocked access to Megaupload and charged seven men, saying the site facilitated millions of illegal downloads of movies, music and other content.
The company says its millions of users stored their own data, including family photos and personal documents. They haven't been able to see their data since the government raids earlier this month, but there has been hope would be able to get it back.
Megaupload hires outside companies to store the data, for a fee. But Megaupload attorney Ira Rothken said Sunday that the government has frozen its money.
A letter filed in the case Friday by the U.S. Attorney's Office for the Eastern District of Virginia said storage companies Carpathia Hosting Inc. and Cogent Communications Group Inc. may begin deleting data Thursday. Spokespersons for the two companies and for the U.S. Attorney's Office did not respond to messages Sunday night.
The letter said the government copied some data from the servers but did not physically take them. It said that now that it has executed its search warrants, it has no right to access the data. The servers are controlled by Carpathia and Cogent and issues about the future of the data must be resolved with them, prosecutors said.
Rothken said the company is working with prosecutors to try to keep the data from being erased. He said at least 50 million Megaupload users have data in danger of being erased.
Rothken said that, besides its customers, the data is important to Megaupload so it can defend itself in the legal case.
"We're cautiously optimistic at this point that because the United States, as well as Megaupload, should have a common desire to protect consumers, that this type of agreement will get done," he said.
Megaupload is based in Hong Kong. U.S. authorities said they had authority to act because some of its leased servers are in Virginia.
AP Business Writer Daniel Wagner contributed to this report.