Kim Dotcom and his former wife Mona have accepted a confidential settlement from the police over the raid which saw him arrested, saying he did so to protect their children and because the Government "recently changed for the better".
He said that their previous desire to see accountability had been trumped by wanting to "do what was best for our children" by bringing an end to the court case.
The settlement came after a damages claim was filed with the High Court over what was considered an "unreasonable" use of force when the anti-terrorism Special Tactics Group raided his $30 million mansion in January 2012.
The raid was part of a worldwide FBI operation to take down Dotcom's Megaupload file-sharing website which was claimed to be at the centre of a massive criminal copyright operation.
Dotcom and three others were arrested and await extradition to the United States on charges which could land them in prison for decades.
The NZ Herald has learned earlier settlements were reached between police and others arrested, including Bram van der Kolk and Mathias Ortmann.
It was believed their settlements were six-figure sums and it is likely Dotcom would seek more as the main target in the raid.
He was also the focus of risk assessments used to justify the use of the anti-terrorism squad which carried out a helicopter assault at dawn. Those assessments included photographs of Dotcom carrying shotguns - pictures taken while clay pigeon shooting - and descriptions of him as violent despite a lack of evidence to support the claim.
The court challenge also questioned "visual surveillance" which had not been authorised by the court. Evidence has emerged in court hearings of police watching the Dotcom Mansion from neighbouring properties, and scouting the mansion interior with a hidden camera carried on to the property by a local police officer on a goodwill meeting the day before the raid.
The next day, armed police hunted for Dotcom through the mansion, cracked open doors to the nanny's and children's rooms and kept Mona - pregnant with twins at the time - standing in the chill, damp dawn in her nightwear.
Dotcom said he and Mona had "respect" for police in New Zealand.
"They work hard and have, with this one exception, treated me and my family with courtesy and respect.
"We were shocked at the uncharacteristic handling of my arrest for a non-violent Internet copyright infringement charge brought by the United States, which is not even a crime in New Zealand."
Dotcom said police could have knocked on his door at a "reasonable hour" and simply told him he was under arrest.
Instead, he said the arrest became "a Hollywood-style publicity stunt tailored to appease US authorities". He said he believed that was due to "a misguided desire to cater to the United States authorities and special interests in Hollywood".
"The New Zealand police we know do not carry guns. They try to resolve matters in a non-violent manner, unlike what we see from the United States.
"We are sad that our officers, good people simply doing their job, were tainted by US priorities and arrogance."
Dotcom said the law suit to seek damages from police was taken because "we believed their military-style raid on a family with children in a non-violent case went far beyond what a civilised community should expect from its police force".
"New Zealanders deserve and should expect better."
But he said he and Mona had decided a trial was not in the interests of their family - the couple have five children - as neither parent wanted the children to "relive past events".
"Our children are now settled and integrated safely here into their community and they love it. We do not want to disrupt our children's new lives. We do not want to revictimise them. We want them to grow up happy.
"That is why we chose New Zealand to be our family home in the first place. We are fortunate to live here. Under the totality of the circumstances, we thought settlement was best for our children."
Dotcom also cited another reason: "The New Zealand Government has recently changed for the better."
The comment is a reflection of his ongoing opposition to former Prime Minister Sir John Key, who he maintained had a deeper involvement in the raids. Key has denied this repeatedly.
Dotcom's New Zealand lawyer Ron Mansfield said it was hoped the court case had brought about a change in how police handled future operations.
He said a separate damages case against the Government Communications Security Bureau was still before the court even though it had admitted carrying out unlawful surveillance.
"The GCSB refuses to disclose what it did or the actual private communications it stole. The Dotcoms understandably believe that they are entitled to know this."
A police spokesman confirmed the settlement saying it meant there would be no five-week trial which was scheduled to be heard at the High Court next October.
"While we are unable to discuss details of the settlement, we can say that it is not uncommon in civil proceedings for parties to reach a settlement before a trial commences. This settlement avoids the significant costs which would have been incurred had the trial proceeded."