The flamboyant Dotcom said his new offering, Mega.co.nz, which will launch on Sunday even as he and three of his colleagues await extradition from New Zealand to the United States, complied with the law and warned that attempts to take it down would be futile.

"One thing has to be clear: This is not some kind of finger to the U.S. government or to Hollywood," Dotcom told Reuters at his sprawling estate in the bucolic hills of Coatesville, just outside Auckland.

"Legally, there's just nothing there that could be used to shut us down, this site is just as legitimate and has the right to exist as Dropbox, Boxnet and other the other competitors in this space," he said, referring to other popular cloud storage services.

His lawyer, Ira Rothken, added that launching the new site was compliant with the terms of Dotcom's bail conditions.

U.S. prosecutors argue that, in a statement related to his bail proceedings last year, Dotcom said he had no intention of starting a new internet business until his extradition was resolved.

Dotcom will celebrate the launch will a party at his home, a mansion worth roughly NZ$30 million ($25.05 million), which features a servants' wing, hedge maze and life-size statues of giraffes and a rhinoceros in the grounds.

A year ago, New Zealand's elite special tactics forces choppered into Dotcom's home in a dawn raid to arrest him and his colleagues and confiscate evidence related to Megaupload, at the request of the FBI.

CODES AND KEYS

Dotcom says Mega is a different beast to Megaupload, as the new site enables users to control exactly which users can access uploaded files, in contrast with its predecessor, which allowed users to search files, some of which contained copyrighted content allegedly used without permission.

A sophisticated encryption system will allow users to encode their files before they upload them onto the site's servers, which Dotcom said were located in New Zealand and overseas. He declined to specify where.

Each file will then be issued a unique, sophisticated decryption key which only the file holder will control, allowing them to share the file as they choose.

As a result, the site's operators would have no access to the files, which they say would strip them from any possible liability for knowingly enabling users to distribute copyright-infringing content, which Washington says is illegal.

"Even if we wanted to, we can't go into your file and snoop and see what you have in there," the burly Dotcom said.

Dotcom - a German national who also goes by the name Kim Schmitz - and his colleagues face years in prison if they are convicted, although the case is expected to drag on for years.

Known as much for his previous cyber crime-related arrests as his penchant for fast cars and yacht parties, Dotcom promised an extravagant launch for Mega as builders put the finishing to a festival-sized concert stage in the mansion's grounds.

Two helicopters circled overhead as workers erected a massive white replica of Mega's capitalized, block-lettered logo on the hills flanking the approach to the mansion. Dotcom was coy about what guests could expect from the event.

Expecting huge interest in its first month of operation, he said Mega's launch will be a far cry from when Megaupload went live in 2005.

Then, he and his colleagues were glued to their computer screens in a tiny office, cheering each time the counter showing the number of hits on the site ticked up towards 10.

"I would be surprised if we had less than 1 million users," Dotcom said.

($1 = 1.1977 New Zealand dollars)

(Editing by Daniel Magnowski)

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