Kim Dotcom's lawyers have applied to a US court to have charges against his internet company Megaupload dismissed.

It was heard in a district court in Virginia this morning.

His New Zealand lawyer Greg Towers says an application was also made to release Kim Dotcom's frozen assets to pay for legal fees.

"The judge has said: I will not grant legal funds at this point, but that has been deferred for another day, however I will grant the lawyers in the US leave to appear before me to argue whether or not Megaupload should be dismissed from the allegations and the indictment."


Mr Towers says the judge has said Kim Dotcom's lawyers and US Government should file papers by July 18 for a hearing.