Dotcom and several others ran Megaupload, a now-defunct file-sharing site that drew the ire of the entertainment industry for its alleged illegal trade in material under copyright protection.

The U.S. is seeking to extradite Dotcom, who was indicted along with six others by a U.S. grand jury in January on copyright infringement, racketeering and money laundering charges. The U.S. Department of Justice alleges Megaupload collected US$175 million in criminal proceeds and caused more than $500 million in damages to copyright holders.

Dotcom was arrested during a dramatic raid last month at his rented mansion near Auckland, where law enforcement officials extracted him from a special safe room.

He was denied bail in two previous hearings after U.S. government representatives contended that he was a flight risk, arguing that he holds German and Finnish passports and possibly still had access to other secret funds.

But District Court Judge N.R. Dawson wrote in a Wednesday ruling that by fleeing, Dotcom "would be abandoning his expectant wife and three children, and he would effectively lose all the considerable assets and bank accounts in a number of countries that have been seized or frozen."