A New Zealand court granted bail on Thursday to two associates of the founder of online file-sharing website Megaupload, accused of being involved in a scheme that allegedly made more than $175 million from Internet piracy and illegal file sharing.

Dutchman Bram van der Kolk, 29, and Finn Batato, a 38-year-old German, who were arrested last Friday along with Megaupload's founder, Kim Dotcom, were freed on bail. A decision on another accused, Mathias Ortman, was put off until Friday pending further submissions on his bail application.

"I am satisfied that the risk of flight here is minimal and such risk as remains can be met by the imposition of strict bail conditions including electronic monitoring," Judge David McNaughton said in a written judgement.

A lawyer for the men had argued their role in the company was different from that of Dotcom, and they did not have secret sources of funds or multiple identities.

The United States wants to extradite all four on charges of Internet piracy, copyright infringement, racketeering and money laundering.

• Related: Megaupload a story of Dotcom boom and bust

Dotcom, 38, was refused bail on Wednesday because the judge believed there was a significant risk he could try to flee New Zealand. He will reappear in court on Feb. 22. His lawyer is preparing to appeal that decision, maintaining that Dotcom does not have the means to leave the country.

The defendants have said they are innocent of the piracy and other charges, asserting the company simply offered online storage.

Nigel Marple / Reuters

An aerial view of the Dotcom Mansion, home of accused Kim Dotcom, who founded the Megaupload.com site and ran it from the $30 million mansion in Coatesville, Auckland.

An extradition application must be lodged within 45 days of an arrest, and the U.S. must show the alleged offences would be crimes in New Zealand punishable by at least 12 months in jail.

Legal experts have said the extradition process is likely to be long and complex.

A U.S. Justice Department official told The Associated Press a sixth suspect, Sven Echternach, has been located in Germany, but declined to say if he'd been arrested.

Reuters and the Associated Press contributed to this report.

The founder of file-sharing website Megaupload was ordered to be held in custody by a New Zealand court Monday, as he denied charges of Internet piracy and money laundering. Two other suspects were also arrested in Europe.

Prosecutor Anne Toohey argued at a bail hearing that Kim Dotcom, a German national also known as Kim Schmitz, was a flight risk "at the extreme end of the scale" because it was believed he had access to funds, had multiple identities and had a history of fleeing criminal charges.

"The FBI believes the sums located are unlikely to represent all the overseas bank accounts owned by Mr. Dotcom," she said.

Toohey told the court that when police detained Dotcom there was an open safe about four yards away from him containing a firearm, Radio New Zealand reported. The safe's keys were in the lock.

But Dotcom's lawyer said he posed no threat of absconding or restarting his businesses, arguing that his client had cooperated fully, his passports had been seized and his funds frozen, and also that he had a distinctive appearance.

"He is not the sort of person who will pass unnoticed through our customs and immigration lines and controls," defense lawyer Paul Davison said of the former hacker, who is reportedly 6ft 6ins and 285 lbs.

• Feds shut down Megaupload

Davison also said Dotcom wants to stay in New Zealand because his wife and children were there, Radio New Zealand said.

Judge David McNaughton said the bail application was too complicated for an immediate ruling, adding he would issue a written decision no later than Wednesday.

U.S. authorities want to extradite Dotcom on charges he 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. Megaupload's lawyer has said the company simply offered online storage.

FileSonic halts file-sharing
Prosecutor Toohey said two other men sought for involvement in Megaupload had been arrested in Europe. U.S. authorities had earlier issued international warrants for Sven Echternach, 39, a German, and Andrus Nomm, 32, of Estonia.

The shockwaves of the case appeared to be spreading among rival websites offering lucrative file-sharing. FileSonic, a website providing online data storage, said in a statement on its website that it had halted its file-sharing services.

"All sharing functionality of FileSonic is now disabled. Our service can only be used to upload and retrieve files that you have uploaded personally," it said.

Natalie Slade / AP

An aerial shot of Kim Dotcom's house in Coatesville, north west of Auckland.

Dotcom, 38, and three others, were arrested Friday after New Zealand police raided his country estate at the request of the U.S. Federal Bureau of Investigation. Police cut Dotcom out of a safe room he had barricaded himself in, because, according to his lawyer, he was frightened and panicked.

• Megaupload founder's homes raided, $5M in luxury cars seized

Presenting the case for flight risk, the prosecutor said 45 credit cards in three wallets were found in the mansion under Dotcom's various names, while three passports were also found. But his defense lawyer said: "My client collects them (credit cards), most of them are out of date."

Dotcom smiled and waved at around 20 supporters who filled the courtroom and spoke to them after the judge's decision.

"Hey guys thanks for turning up, I appreciate it," he said, wishing a female supporter a "happy birthday."

Defense lawyer Davison said Dotcom was "realistic about what is happening."

"He would obviously prefer to be at large. He doesn't want to be there any longer than he absolutely has to be," he told reporters outside the court.

Media reported that Dotcom ordered around NZ$4 million ($3.2 million) of renovations to the sprawling mansion that he leased near Auckland, with its manicured lawns, fountains, pools, palm-lined paths and extensive security.

The case is being heard as the debate over online piracy reaches fever pitch in Washington, where Congress is trying to craft tougher legislation.

Piracy laws debated
Lawmakers stopped anti-piracy legislation on Friday, postponing a critical vote in a victory for Internet companies that staged a mass online protest against the fast-moving bills.

The movie and music industries want Congress to crack down on Internet piracy and content theft, but major Internet companies such as Google and Facebook have complained that current drafts of the legislation would lead to censorship.

Critics of the U.S. Stop Online Piracy Act, or SOPA, and Protect IP Act (PIPA), quickly showed their opposition to the shutdown of Megaupload.com, with hackers attacking the public websites of the Justice Department, the world's largest music company Universal Music, and the two big trade groups that represent the music and film industries.

Dotcom's New Zealand lawyer Davison said in court that Megaupload's business was being misrepresented and authorities were being aggressive to add drama to the case.

"His business did not reproduce or copy material as alleged," he told the court, adding that copyright holders had been given access to Megaupload to identify improper posting of material. He likened the site to the popular YouTube video site, where people "promoted their creativity."

In New Zealand, questions are being asked about how Dotcom, who moved to the country in 2010, could be given permanent residency under a business investor scheme despite criminal convictions for insider trading.

A legal expert said extradition arrangements between New Zealand and the United States were reasonably straightforward and standard, but there were some important factors.

"The offence for which extradition is sought must be an offence in the jurisdictions of both states," said Otago University law professor Kevin Dawkins, adding that an accused must be tried on the offence for which they are extradited.

'Fast cars, hot girls, superyachts'
New details emerged about Dotcom's lavish lifestyle and tastes, with reports that he had a heated lap pool built just off the master ensuite, with underwater speakers, and imported spring water.

"It's insane, and it gets more insane inside. When we were there we called it 'extreme home makeover, millionaire edition'," a source close to the teams that did renovation work told the New Zealand Herald.

A film posted on the Internet shows Dotcom, surrounded by topless women and men spraying champagne on board a superyacht during a "crazy weekend" in Monaco reported to have cost $10 million.

• Megaupload chief has wild ride before arrest

"Fast cars, hot girls, superyachts and amazing parties. Decadence rules," said the commentary accompanying the so-called fun documentary, which Dotcom dedicated to "all my fans."

The FBI estimates that Dotcom personally made around $115,000 a day during 2010 from his empire. The list of property to be seized, includes nearly 20 luxury cars, one of them a pink Cadillac, works of art, and NZ$10 million invested in local finance companies.

Reuters and msnbc.com staff contributed to this report.

Police in New Zealand on Friday raided several homes and businesses linked to the founder of Megaupload.com, a giant file-sharing site shut down by U.S. authorities, and seized guns, millions of dollars, and nearly $5 million in luxury cars, officials said.

Police arrested founder Kim Dotcom and three Megaupload employees Thursday on U.S. accusations that they facilitated millions of illegal downloads of films, music and other content, costing copyright holders at least $500 million in lost revenue. Extradition proceedings against them could last a year or more.

David Rowland / EPA

(L-R) Bram van der Kolk, Finn Batato, Mathias Ortmann and German national Kim Schmitz, also known as Kim Dotcom, are remanded in custody at the District Court on charges in a US copyright infringement investigation in Auckland, New Zealand, 20 January 2012.

With 150 million registered users, about 50 million hits daily and endorsements from music superstars, Megaupload.com was among the world's biggest file-sharing sites. According to a U.S. indictment, the site, which was shut down Thursday, earned Dotcom $42 million in 2010 alone.

Although the company is based in Hong Kong and Dotcom lives in New Zealand, some of the alleged pirated content was hosted on leased servers in Virginia, and that was gave U.S. prosecutors jurisdiction to act.

• RELATED: Anonymous says it takes down FBI, DOJ, entertainment sites

New Zealand police served 10 search warrants at several businesses and homes around the city of Auckland.

Police spokesman Grant Ogilvie said the seized cars include a Rolls-Royce Phantom Drophead Coupe worth more than $400,000 as well as several Mercedes. Two short-barreled shotguns and a number of valuable artworks were also confiscated, he added.

Pictures posted on Flickr and technology news website Gizmodo showed the haul included a 2010 Maserati and a pink Cadillac. One Mercedes had the personalized license place "MAFIA,"while another had a plated that read "CEO."

A report by New Zealand news website stuff.co.nz said Detective Inspector Grant Wormald from the Organized and Financial Crime Agency NZ (OFCANZ) gave details of the extraordinary raid, which had been planned for several months.

"Police arrived in two marked police helicopters," said Wormald, according to the website. "Despite our staff clearly identifying themselves Mr. Dotcom retreated into the house and activated a number of electronic locking mechanisms. While police neutralized these locks he then further barricaded himself into a safe room within the house which officers had to cut their way into."

Once they gained entry into this room they found Dotcom near a firearm which had the appearance of a sawed-off shotgun, Wormald said.

"It was definitely not as simple as knocking at the front door," he added.

New Zealand's Fairfax Media reported that the four defendants stood together in an Auckland courtroom in the first step of the extradition proceedings.

'Nothing to hide'
Dotcom's lawyer raised objections to a media request to take photographs and video, but then Dotcom spoke, saying he didn't mind photos or video "because we have nothing to hide." The judge granted the media access, and ruled that the four would remain in custody until a second hearing Monday.

Dotcom, Megaupload's former CEO and current chief innovation officer, is a resident of Hong Kong and New Zealand and a dual citizen of Finland and Germany who had his name legally changed. The 37-year-old was previously known as Kim Schmitz and Kim Tim Jim Vestor.

Two other German citizens and one Dutch citizen also were arrested and three other defendants — another German, a Slovakian and an Estonian — remain at large.

Megaupload has retained Washington, D.C. power attorney Bob Bennett in the case, according to a person inside the company. Bennett is best known for representing former President Bill Clinton during the Monica Lewinsky scandal. The person within Megaupload spoke on condition of anonymity because he was not authorized to discuss the company's plans.

The Electronic Frontier Foundation, which defends free speech and digital rights online, said in a statement that the arrests set "a terrifying precedent. If the United States can seize a Dutch citizen in New Zealand over a copyright claim, what is next?"

The indictment was unsealed one day after websites including Wikipedia and Wired shut down in protest of two U.S. proposals intended to make it easier for authorities to go after sites with pirated material, especially those with overseas headquarters and servers.

Before Megaupload was taken down, the company posted a statement saying allegations that it facilitated massive breaches of copyright laws were "grotesquely overblown."

"The fact is that the vast majority of Mega's Internet traffic is legitimate, and we are here to stay. If the content industry would like to take advantage of our popularity, we are happy to enter into a dialogue. We have some good ideas. Please get in touch," the statement said.

Several sister sites were also shut down, including one dedicated to sharing pornography files.

Retaliation
News of the shutdown seemed to bring retaliation from hackers who claimed credit for attacking the Justice Department's and FBI websites. Federal officials confirmed the Justice Department site was down for hours Thursday evening, and that the disruption was being "treated as a malicious act."

A loose affiliation of hackers known as "Anonymous" claimed credit for the attacks. Also hacked was the site for the Motion Picture Association of America.

According to the indictment, Megaupload was estimated at one point to be the 13th most frequently visited website on the Internet. Current estimates by companies that monitor Web traffic place it in the top 100.

Megaupload is considered a "cyberlocker," in which users can upload and transfer files that are too large to send by email. Such sites can have perfectly legitimate uses. But the Motion Picture Association of America, which has campaigned for a crackdown on piracy, estimated that the vast majority of content being shared on Megaupload was in violation of copyright laws.

Elliot Kember / EPA

The New Zealand mansion rented by co-operator of the file-sharing platform Megaupload, Kim Schmitz, also known as Kim Dotcom.

The website allowed users to download some content for free, but made money by charging subscriptions to people who wanted access to faster download speeds or extra content. The website also sold advertising.

Megaupload was unique not only because of its massive size and the volume of downloaded content, but also because it had high-profile support from celebrities, musicians and other content producers who are most often the victims of copyright infringement and piracy. Before the website was taken down, it contained endorsements from Kim Kardashian, Alicia Keys and Kanye West, among others.

The company listed Swizz Beatz, a musician who married Keys in 2010, as its CEO. He was not named in the indictment and, via a representative, declined to comment.

The five-count indictment, which alleges copyright infringement as well as conspiracy to commit money laundering and racketeering, described a site designed specifically to reward users who uploaded pirated content for sharing, and turned a blind eye to requests from copyright holders to remove copyright-protected files.

The Justice Department said it was illegal for anyone to download pirated content, but their investigation focused on the leaders of the company, not end users who may have downloaded a few movies for personal viewing.

A lawyer who represented the company in a lawsuit last year declined to comment Thursday. Efforts by the Associated Press to reach an attorney representing Dotcom were unsuccessful.

The Associated Press and msnbc.com staff contributed to this report.