NZ court rejects bid to rejail Megaupload boss, frees cash

WELLINGTON (Reuters) - The founder of the online file-sharing site Megaupload.com has asked a New Zealand court to free nearly a quarter of a million dollars in frozen assets to pay for living expenses, including nannies and bodyguards, as a bid by the United States to put him back behind bars was thrown out of court on Wednesday.

Kim Dotcom, a German national also known as Kim Schmitz and Kim Tim Jim Vestor, is charged by the United States with being an Internet pirate whose group netted $175 million since 2005 by copying and distributing music, movies and other copyrighted content without authorisation.

Dotcom, who is on bail in New Zealand pending an extradition hearing, says the company offered online storage and will fight extradition.

With all his funds frozen, Dotcom on Wednesday asked for around NZ$220,000 to be released to cover lease costs of a multi-million dollar mansion outside of Auckland, wages for staff, and other living expenses such as phones and power.

The application said that Dotcom paid NZ$1 million a year to lease the country estate, around NZ$600,000 on maintenance and property costs. He also sought more than NZ$50,000 a month to pay for a nanny, a tutor for an autistic child, personal assistants, and four bodyguards.

The New Zealand High Court granted Dotcom an interim payment of around NZ$32,000 to cover immediate living costs, as well as the use of a car, pending a final decision on continuing financial support.

Dotcom has three children and his wife is due to give birth to twins late next month.

In a separate High Court case, the United States appealed against Dotcom's bail and asked for him to be returned to jail pending his extradition hearing in late August.

The prosecution said Dotcom is an extreme flight risk because he has had multiple passports, sources of funds, access to various means of travel, and a previous history of fleeing to avoid criminal charges.

But the court rejected the appeal, saying the electronic bracelet Dotcom must wear, along with other restrictions on his movements, were sufficient to allow him to remain free.

"It's great to be able to return home with my family and I'm looking forward to fight these charges on a level playing field, so indeed I'm very relieved today," Dotcom told reporters outside the court.

Last week the lower court placed Dotcom under virtual house arrest in a small house on a corner of the country estate.

Signs at the entrance to the house tell visitors to leave all mobile phones, smart phones and laptops at the gate, as Dotcom is forbidden to use the Internet as a condition of bail.

Dotcom, 38, and three others, were arrested on January 20 after armed New Zealand police raided his country estate at the request of the U.S. Federal Bureau of Investigation.

An extradition hearing to send all four to the United States for trial has been set down for late August.

(Writing by Gyles Beckford; Editing by Ed Lane and Michael Perry)