Via Reuters:

Lawyers for popular file-sharing company Megaupload, accused of copyright theft and internet piracy, have moved to have the case thrown out in the United States and tens of millions of dollars of assets unfrozen, a U.S. counsel said on Thursday.

Before it was shut down in January, Megaupload was one of the world’s most popular websites, where millions of users stored data, either for free or by paying for premium service.

The FBI claims founder Kim Dotcom 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.

Papers have been filed stating that U.S. federal authorities cannot charge the company with criminal behavior because it is Hong Kong based, and also that no papers have ever been formally served, the lawyer said.

Megaupload’s assets were seized and its executives in New Zealand and Holland arrested in January on warrants issued by the FBI alleging money laundering, internet piracy, and illegal file sharing.

But Megaupload’s U.S. counsel said the FBI had made a fundamental mistake.

“The law here in the United States is that you can’t indict and then serve a company that does not have a presence in the United States,” Ira Rothken told Radio New Zealand.

He said the case against Megaupload and its executives should be dismissed.

“This case was flawed from the start, once this case gets dismissed it cannot be fixed,” Rothken said.

Megaupload chief executive Dotcom, 39, spent nearly a month in jail after New Zealand police raided a luxury country estate and cut him out of a safe room in which he had barricaded himself.

U.S. authorities have asked for him and three other executives to be extradited.

Megaupload has always maintained that it simply offered online storage, and that music and movie companies were given every opportunity to have illegal material removed.

Dotcom is on bail after he convinced a court that he was not going to abscond.

In the past week he has been allowed back to his mansion, and had travel restrictions eased. A New Zealand judge also ordered prosecutors to give Dotcom’s lawyers access to evidence collected against him and co-defendants.

Rothken said he had also filed papers in the U.S. to unfreeze Megaupload funds, which could be used by the defendants to defend themselves.

The FBI was not immediately available for comment.