The data of around 50 million MegaUpload users stored on servers from third party storage providers could be erased as early as Thursday, despite claims by the file sharing company’s lawyers that doing so would compromise their ability to defend themselves in court.

Access to MegaUpload has been blocked since US authorities arrested several employees of the company on January 19, including its founder Kim Dotcom, who all stand accused of massive online piracy as well as money laundering, in what some insiders call the biggest case of its kind ever brought before the courts.

Lawyers for MegaUpload argue that losing user data would reduce their ability to defend themselves against these charges, and will affect millions of users of the service who have innocently uploaded important files, such as family photos and personal documents.

"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," said Ira Rothken, an attorney for MegaUpload.

MegaUpload employs storage companies Carpathia Hosting and Cogent Communications Group to store data uploaded by its users. Because the government has frozen the firm's assets it is unable to make good on its obligations with these companies in order to keep existing contracts running. Both companies say they will likely begin wiping data on Thursday, according to a letter filed with the court on Friday.

It has been confirmed that law enforcement personnel have copied some of the data, but never actually seized any of the servers used by the two storage companies that house MegaUpload's uploaded data. Given that the original search warrants have now been executed they have no legal right to access the remaining data.

Representatives of the US Attorney’s Office, as well as the two data storage companies have not answered requests for comments.