Kiwi police, while acting for the FBI, raided Megaupload founder Kim Dotcom's house, arrested him, stole computer data and shipped it off to the US completely illegally, a New Zealand Court has ruled.
When more than 70 police raided Dotcom's mansion at the request of the FBI they did so thinking that they only needed a general search warrant.
But High Court judge Justice Helen Winkelmann found the warrants used in the seizure of property from Dotcom's mansion near Auckland were illegal. She was particularly annoyed that the Kiwi police allowed FBI agents to copy data from Dotcom's computer and take it out of the country.
She said that the warrants did not adequately describe the offences to which they related.
New Zealand's police said in a statement they were considering the judgement and were in discussions with Crown Law "to determine what further action might be required".
Dotcom is on bail in New Zealand, fighting attempts by the US government to extradite him on charges of copyright theft and money laundering. An extradition hearing is set for August.
Reuters quoted lawyers representing the US government as saying that the ruling had come as "no surprise". Its legal team would be discussing options, including whether an appeal will be lodged.
US lawyers for Megaupload have argued that the FBI cannot charge the company with criminal behaviour because it is Hong Kong based, and also that no papers have ever been formally served.
The US government on the other hand has to arrest anyone who big corporates say is a criminal otherwise their politicians will not get campaign funds.