Two former colleagues of tech entrepreneur Kim Dotcom have agreed to face online piracy charges in a New Zealand court in exchange for US extradition proceedings being dropped, authorities and the defendants said on Tuesday.

Dotcom, founder of the Megaupload file-sharing system, is still being pursued by the United States on fraud, money laundering and racketeering charges punishable with up to 20 years in jail.

The website -- an early prototype of cloud storage -- was shut down when New Zealand police raided Dotcom's Auckland mansion in January 2012 at the behest of the FBI, triggering numerous court hearings and appeals.

Former coders Mathias Ortmann and Bram van der Kolk said in a statement issued by their lawyer that they have agreed to face equivalent charges in New Zealand.

"We have reached an agreement with the New Zealand Government and the United States of America under which we have agreed to be charged in New Zealand for offences similar to those we face in the United States," the two men said.

They emphasised that the case has taken a "heavy toll on our lives" and that neither wants to leave New Zealand, where they have residency.

Kim Dotcom was originally charged with racketeering, fraud and money laundering in the United States and still faces extradition
Kim Dotcom was originally charged with racketeering, fraud and money laundering in the United States and still faces extradition AFP / MICHAEL BRADLEY

New Zealand's Crown Law Office confirmed the deal in a statement, saying the charges filed in Auckland District Court on Tuesday morning were the equivalent of what the pair would have faced in the United States.

US prosecutors allege the Megaupload service facilitated widespread piracy of films and publications, costing rights holders more than US$500 million.

Dotcom is now the last remaining person charged in the case to still be facing extradition.

A fourth defendant, former Megaupload marketing manager Finn Batato, had extradition charges dropped last year after developing a life-threatening medical condition.

All four men have maintained their innocence, questioning why Megaupload was targeted.

Dotcom responded on social media on Tuesday, posting a defiant photograph accompanied by a message: "Keep fighting!".

He denies any wrongdoing and is living in Queenstown, New Zealand while on bail as he fights extradition proceedings.