The U.S. government has been seeking to extradite Dotcom since 2012, so far unsuccessfully, on charges of copyright infringement and other allegations including money-laundering but the latest ruling still puts that on the cards.

The ruling did not determine whether Dotcom, a German national who has permanent residency in New Zealand, and his co-accused are guilty of the charges, but only whether they can be extradited to the U.S..

Earlier this week, the New Zealand High Court ruled that Dotcom and three co-accused could not be extradited to the U.S. on copyright infringement charges but there were other charges that could make such a process occur.

Lawyers acting for Kim Dotcom have accused New Zealand prosecutors of acting in an "illegal" way in the extradition saga of the founder of file storage site Megaupload.com.

Kim Dotcom and other special guests discuss the revelations about New Zealand's mass surveillance at Auckland Town Hall on September 15, 2014 in Auckland, New Zealand.

The U.S. Federal Bureau of Investigation (FBI) claims that Megaupload has cost copyright owners $500 million while the site has generated more than $175 million.

However his legal team has said that now the judges have said that Dotcom could not be extradited on the grounds of copyright infringement, the rest of the charges, which include money laundering and fraud, should be dismissed as well.

"Our view is that the charges are like a house of cards. Once you get rid of criminal copyright infringement, everything falls. There is no money laundering if you have a non-copyright infringing cloud storage site," Ira Rothken, Dotcom's lead global counsel, told CNBC by phone on Thursday.

Under New Zealand law, if someone else uses your website or network to infringe copyright, then you are not deemed to have infringed copyright. This "safe harbor" in New Zealand is being used by Rothken to defend Dotcom.

Timeline of events:

Kim started file-sharing site Megaupload.com in 2005

He was granted New Zealand residency in 2010 and has been living in Auckland since then

U.S. authorities shut down Megaupload.com in 2012 and Dotcom was charged with copyright infringement and other allegations including money laundering

On Jan 20, 2012, $50 million of Dotcom's assets in Hong Kong, where he founded Megaupload.com. were frozen

That same year, Dotcom's house was raided by New Zealand authorities. The U.S. began extradition proceedings

The extradition hearing began in 2015 and has been going through numerous courts

In February 2017, the New Zealand High Court said that Dotcom can still be extradited, but not on copyright infringement charges

Rothken accused the New Zealand authorities of acting "illegally" in their raid of Dotcom's home in 2012.

"The search warrants were provided to the New Zealand court for alleged crimes of copyright infringement, now we know that that is a non-existent crime, it's an erroneous claim. So the search warrants were granted on a basis on which they never should have been granted," Rothken told CNBC.

The New Zealand Ministry of Justice was not available for comment when contacted by CNBC.

Now that the High Court has ruled that there was no copyright infringement, the lawyer said that the extradition request is likely to be thrown out when he takes it to the New Zealand Court of Appeal.

"We think it will be very quick when Court of Appeal looks at this to basically say that this case can no longer be sustained and should be dismissed. We believe the remaining claims have no merit," Rothken said, adding that he will be filing an appeal notice within 15 days.

Dotcom's legal team will are now also looking to unfreeze Dotcom's assets in Hong Kong and also seek "remedy" for the raid of the internet entrepreneur's house.

While his legal team did not say how much they were seeking in damages, Dotcom tweeted early on Thursday that he would sue the New Zealand government for $2.4 billion.





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Rothken said that this was not the immediate focus, but one day Dotcom may want to bring such a claim "for the harm that was caused to him from the takedown of Megaupload.com."