U.S. crime-fighters failed in a bid to keep alleged Internet pirate file-sharing website Megaupload founder Kim Dotcom behind bars on Wednesday, Feb 22, when a New Zealand court freed him from jail and instead put him under effective house arrest and banned him from using the Internet.

The court, in upholding a bail application by the German founder of file-sharing website Megaupload, cast some doubt on the multi-millionaire's purported flight risk pending an extradition hearing scheduled for August.

"I'm relieved to go home and see my three little kids and my pregnant wife," a smiling Dotcom, 38, said after the ruling, as he was hustled toward a waiting car by supporters and lawyers.

Wearing his usual black T-shirt, trouser and jacket, he vowed to fight the eventual extradition hearing on U.S. charges of copyright piracy, racketeering and money-laundering.

Kim Dotcom, who has New Zealand residency and is also known as Kim Schmitz and Kim Tim Jim Vestor, had been in custody since his arrest in a military-style raid on January 20 on his mansion outside Auckland by local police acting on a U.S. warrant.

Under the bail conditions, Dotcom, who kept a private helicopter as part of his lavish lifestyle, must live in a small house near the mansion he had rented and wear an electronic tag. He will be restricted in how far he can travel. The judge also banned helicopters from flying to or landing on the property.

Prosecutors say Dotcom was the ringleader of a group that netted $175 million since 2005 by copying and distributing music, movies and other copyrighted content without authorization through Megaupload.com and related websites, among the world's busiest before they were shut down last month.

Dotcom's lawyers say the company simply offered online storage and that he strenuously denies the U.S. charges.

Dotcom obtained bail on 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, Reuters reported.