The founder of online file-sharing website Megaupload argued in a New Zealand court Monday he was innocent on charges of internet piracy and money laundering and said authorities were trying to portray the blackest picture of him.

Kim Dotcom, a German national, also known as Kim Schmitz, argued for bail saying through his lawyer that he posed no threat of absconding or restarting his businesses.

Mr Dotcom emphatically denies any criminal misconduct or wrongdoing, and denies the existence of a Mega Conspiracy, defense lawyer Paul Davison told the court Monday.

But prosecutor Anne Toohey said Dotcom posed a flight risk at the extreme end of the scale because it was believed he had access to funds, could easily arrange transport, had multiple identities and had a history of fleeing criminal charges.

Dotcom, 38, and three others, were arrested Friday after police raided his country estate at the request of the U.S. Federal Bureau of Investigation. Police cut Dotcom out of a safe room he had barricaded himself in.

The court adjourned the hearing until later in the day as it considered certain legal issues in closed court.

The judge treated Dotcom's bail application separately from that of the other three accused. Dotcom, dressed in black pants and a tracksuit top, sat quietly in the dock with hands clasped looking at the judge as his lawyer argued for bail.

The court hearing comes as media reported that Dotcom ordered around NZ$4 million ($3.2 million) of renovations to the sprawling mansion that he leased near Auckland, with its manicured lawns, fountains, pools, palm-lined paths and extensive security.

Defense lawyer Davison argued that Dotcom's passports had been seized, his funds frozen, had co-operated with authorities, and wanted to make New Zealand his permanent home.

U.S. authorities want to extradite Dotcom on charges he masterminded a scheme that made more than $175 million in a few short years by copying and distributing music, movies and other copyrighted content without authorization. Megaupload's lawyer has said the company simply offered online storage.

The case is being heard as the debate over online piracy reaches fever pitch in Washington where Congress is trying to craft tougher legislation.

Lawmakers stopped anti-piracy legislation Friday, postponing a critical vote in a victory for Internet companies that staged a mass online protest against the fast-moving bills.

The movie and music industries want Congress to crack down on Internet piracy and content theft, but major Internet companies like Google and Facebook have complained that current drafts of the legislation would lead to censorship.

Critics of the U.S. Stop Online Piracy Act, or SOPA, and Protect IP Act (PIPA), quickly showed their opposition to the shutdown of, with hackers attacking the public websites of the Justice Department, the world's largest music company Universal Music, and the two big trade groups that represent the music and film industries.

Dotcom's New Zealand lawyer Davison said in court that Megaupload's business was being misrepresented and authorities were being aggressive to add drama to the case.

His business did not reproduce or copy material as alleged, he told the court, adding that copyright holders had been given access to Megaupload to identify improper posting of material, which had been taken off the site.

In New Zealand, questions are being asked about how Dotcom, who moved to the country in 2010, could be given permanent residency under a business investor scheme despite criminal convictions for insider trading.

Prime Minister John Key said Dotcom's criminal past had prevented him buying the NZ$30 million mansion and 20 hectare property because he was not a person of good character.

However, he said immigration authorities took into account the wiping of Dotcom's criminal record under Germany's 'clean-slate' laws.

The New Zealand officials contacted the German police. They confirmed that was the situation, that they had no further concerns and so, on that basis, they made the call to grant him residency. That's not unusual, Key said on TVNZ.


A legal expert said extradition arrangements between New Zealand and the United States were reasonably straightforward and standard, but there were some important factors.

The offence for which extradition is sought must be an offence in the jurisdictions of both states, said Otago University law professor Kevin Dawkins, adding that an accused must be tried on the offence for which they are extradited.

New details emerged about Dotcom's lavish lifestyle and tastes, with reports that he had a heated lap pool built just off the master ensuite, with underwater speakers, imported spring water and a custom ladder worth around NZ$15,000.

It's insane, and it gets more insane inside. When we were there we called it 'extreme home makeover, millionaire edition', a source close to the teams that did renovation work the New Zealand Herald.

The anonymous source said other features inside the house included a graffiti-style painting depicting Dotcom and his wife, Mona, on the wall of one room, which also had about seven 60-inch television screens - each with its own X-box and luxury, recliner chair.

A film posted on the Internet shows Dotcom, surrounded by topless women and men spraying champagne on board a super yacht during a crazy weekend in Monaco reported to have cost $10 million.

Fast cars, hot girls, super yachts and amazing parties. Decadence rules, said the commentary accompanying the so-called fun documentary, which Dotcom dedicated to all my fans.

The FBI estimates that Dotcom personally made around $115,000 a day during 2010 from his empire. The list of property to be seized, includes nearly 20 luxury cars, one of them a pink Cadillac, works of art, and NZ$10 million invested in local finance companies.

(Additional reporting by Gyles Beckford in Wellington; Editing by Ed Davies)