Megaupload multi-millionaire co-founder Kim Dotcom has won the bail against extradition to the US and is now under house arrest in New Zealand.

"I'm relieved to go home and see my three little kids and my pregnant wife," a smiling Dotcom, 38, said after the court ruling.

The court also banned him from using the Internet. Kim Dotcom, whose real name is Kim Schmitz, has been in custody since his arrest at the end of January at his mansion outside Auckland, by New Zealand police under a US warrant.

Dotcom will be forced to live in a small house near the mansion and wear an electronic tag. The judge banned helicopters from flying or landing on the property.

The 38-year-old obtained bail at his second attempt, after the judge said a review of the facts and Dotcom's circumstances showed he was less of a risk of fleeing than before.

In the first hearing, prosecutors argued that Doctom's request for bail had to be denied because he presented a high flight risk. Prosecutor Anne Toohey said Dotcom had chartered private planes, helicopters and yachts in the past.

The FBI closed down Megaupload, one of the world's largest file sharing websites on January 20. Prosecutors have charged Kim Dotcom and other founders with racketeering conspiracy, money laundering and plotting to commit copyright infringement.

According to the FBI press release, Megaupload was running an international organised crime enterprise that cheated copyright holders for $500 million in revenue.

Authorities seized $50 million in assets as part of the operation.

Dotcom has been arrested several times before and had become a hate-figure among Hollywood executives and was dubbed Dr Evil.

Dotcom was born in Germany but was running Megaupload from New Zealand.

Before becoming an entrepreneur, Dotcom was convicted of credit card fraud, hacking, insider trading and embezzlement. He was given a two-year suspended sentence for computer hacking and had convictions for the other offences.

Dotcom said the convictions were wiped under a German "clean slate" law.

"Officially, I am as clean as it gets," he told the New Zealand network.

His reputation as a big-spender grew when he tried to buy one of New Zealand's most expensive homes, a mansion northwest of Auckland.

In the US indictment, the list of his property and accounts seized by the FBI is impressive. There is a number of bank accounts, PayPal accounts, 15 Mercedes-Benz vehicles, a Rolls-Royce with the licence plate "GOD," a rare Lamborghini and a Maserati. Indeed, Dotcom had a penchant for creative licence plates and his collection included such gems as, "HACKER," "POLICE," "STONED," "CEO," and "GUILTY."