Papers filed in US attack actions in NZ by Crown Law and say no crimes committed.
Pressure is building on Crown lawyers after the Kim Dotcom legal team filed papers in the United States that could lead to the FBI case being thrown out.
The papers say there is no case against the Megaupload website and ask for charges against the company to be dropped.
Doing so would unlock an $88 million fighting fund as assets in Hong Kong were freed - money that could be used to take a case against New Zealand authorities after a string of errors by the Crown Law Office.
Papers filed with US courts say there is no lawful basis to serve notice of criminal proceedings on an overseas company.
Dotcom's lawyers said Hong Kong-based Megaupload had never been served so should not be facing criminal accusations or have its property restrained. They stated the FBI had acted outside the law when it inspired raids across the globe that led to the firm being shut down and its assets seized. The defence comes four months after raids here based on advice from the Crown Law Office, and action against Megaupload elsewhere.
The raids in January were called Operation Takedown, according to legal papers, and led to Dotcom and three others being arrested on charges of criminal copyright violation.
Personal and company assets around the world were seized and arrest warrants issued for three other Megaupload staff.
The four men face an extradition hearing in August over claims of criminal copyright violation, money-laundering and racketeering through Megaupload, which the FBI claimed attracted 4 per cent of the world's internet traffic.
Crown Law put together its case after investigations by Immigration NZ and the Overseas Investment Office found no issue with Dotcom and Megaupload. At the time, both organisations knew of the FBI interest.
Dotcom said the defence filings exposed a fundamental flaw in the FBI case.
"What becomes more and more apparent is the [US] Department of Justice has rushed into this. They have made so many mistakes. They have created an indictment which doesn't pass any muster."
He said the prosecution had used its flawed case to "go around the world chopping down our business and seizing our assets".
He said the defence motions were the beginning of the "counterstrike".
"It is a major step forward. This is us fighting back."
The US judge who is hearing the case, Liam O'Grady, has previously questioned the failure to serve Megaupload. Told of the gap in the case, he said: "I frankly don't know that we are ever going to have a trial in this matter."
Dotcom's US-based lawyer, Ira Rothken, said 30 lawyers across the globe were working on the case for nothing.
"We're very optimistic these funds will be unfrozen and the lawyers will get paid."
Mr Rothken said the FBI raid had been devastating for the company.
"In a large way, that is exactly what the US wanted."
He said action against the New Zealand Government was something which "will be analysed when Kim Dotcom and the others are exonerated".
Simpson Grierson partner Greg Towers said the legal motions in the US were a big step forward in the case.
"They can't serve Megaupload. They know they can't because they have never even tried to serve the company."
Dotcom's legal motions also stated the US failed to show any crime had been committed by the arrested men. They have stated there is no evidence any member of the group was involved in any copyright infringement.
The legal papers are the first time Dotcom and his co-accused have filed a formal defence against the US charges. The issue will be argued in the US District Court of East Virginia this month.
Former government minister Rodney Hide said three reviews of the Crown Law Office in the past year had shown improvements were needed.
A spokeswoman for the Crown Law Office said three projects were under way to act on the recommendations from the reviews.