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MegaUpload lawyer: U.S. misunderstands the business

Lawyer for MegaUpload founder Kim DotCom asks New Zealand court to release him on bail, saying he's innocent of piracy and money-laundering charges against him. Lawyers for the U.S. say DotCom is an "extreme" flight risk.

A lawyer representing MegaUpload founder Kim DotCom denied his client has engaged in piracy and told a New Zealand judge the U.S. completely misunderstands the nature of his business.

Kim DotCom, owner of online file storage service MegaUpload, is accused of massive piracy. Screen shot: Greg Sandoval/CNET

DotCom, along with three other men accused of helping him run MegaUpload, appeared in court to plead for bail after he was arrested Thursday at his mansion near Auckland. The group is charged with money laundering, racketeering, and online piracy.

In an indictment issued in Virginia, the U.S. contends that MegaUpload was a massive criminal enterprise designed to enable and encourage millions of people to store and distribute unauthorized copies of movies, TV shows, music, and other media. DotCom, a flamboyant figure in the hacking community and Internet for over a decade, has said he and his company are service providers protected under the Digital Millennium Copyright Act.

His attorney told the court that MegaUpload has nothing to do with the uploading of pirated films or video and that the U.S. government completely misunderstands the company's business.

A judge today listened to arguments about whether DotCom should be granted bail, according to multiple New Zealand news reports. Crown law office lawyer Anne Toohey, arguing on behalf of the United States, told the court that DotCom was a significant flight risk and was in possession of illegal firearms when he was arrested, and alleged that he would be able to start up MegaUpload again if released.

Paul Davison, a prominent New Zealand lawyer who represented DotCom during the proceedings, denied his client would attempt to flee. He told the court that DotCom can't go anywhere because authorities have seized all his assets. He said that DotCom's wife is pregnant with twins and asserted it would be impossible for DotCom to operate MegaUpload again. He also said his client would be willing to submit to electronic surveillance.

The judge opted to keep DotCom and the three others in jail until he has sorted out the bail issue. He said whatever he decides about DotCom would apply to the other three men.

According to the reports from the court, the case for denying bail to DotCom appeared to be a strong one. When police arrived he tried to evade arrest by locking himself in a "safe room" and when police ordered him to show his hands, he refused. Allegedly, not far from where he was finally taken into custody, was some kind of sawed-off shotgun, which Toohey said was unlicensed and illegal in New Zealand.

Tooney told the court about some of DotCom's past, including his flight from Germany in 2001 and 2002 after he was accused of felony charges. He was later apprehended in Thailand. In addition, authorities found multiple passports and credit cards in different names at his house, and they contend he still has access to bank accounts that police were not able to freeze. Police are after $172 million worth of cash and assets that they say MegaUpload generated in criminal proceeds. They have already seized millions in cash, cars, and other property.

The bail hearing is the first step in the U.S. government's attempt to bring DotCom, 38, to the United States. After the judge has ruled on bail, U.S. attorneys can start making extradition arguments. They have 45 days following the bail hearing to file their request.