Since I don't read Russian and wouldn't know exactly where to look for up-the-minute Russian news, I can't really confirm this, but Kirill writes:

Since I saw a couple of features about Allofmp3 on Gizmodo, and used them myself a few times, I just wanted to update you on the Allofmp3.com legal voes - today, the DA for Moscow's South-West district, denied IPFI's request to open a criminal case against Allofmp3.com.

The DA's office determined that while Allofmp3's action are in fact theoretically illigal - they do not have the permission of all the artists they feature on the website to distribute their music - in the Russian copyright law there is no specific prohibition of digital distribution over the internet, thus the law couldn't be applied against them.

Basically the catch is in the definition of "distribution" under that law implies actual physical sale of pirated cassetes and disks, in case of downloads the DA office said that "Allofmp3 does not distribute copies of CD's, but creates conditions for its users to use the content themselves", and they don't have an article against that. I think its their online encoding feature that 'saved' them - with it, the user supposedly makes a copy of the song himself, and this is not something that was assumed under the anti-piracy law.

Eventually they will update the law I'm sure, but that will take a while (especially in Russia) so I figure we're ok to use Allofmp3 for a couple more years).

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Update: Here's a nice link: AllofMP3.com escapes criminal lawsuit, for now [Moskalyuk]