A High Court judge has ruled that the court order used to seize assets from the Megaupload founder Kim Dotcom is null and void.
Mr Dotcom and three other men are on bail while the United States government seeks their extradition on charges of internet piracy.
In her judgment, Justice Potter says the Police Commissioner applied for a foreign restraining order in January, when his office should have applied for an interim restraining order.
She says the commissioner has confused the process by applying for the incorrect order and therefore the order that was made has no legal effect.
Justice Potter says the commissioner has since tried to correct the mistake by making the right application.
A hearing to decide if the assets will be released will be held next week.
The Police Commissioner's office says it does not wish to comment because the case is before the courts.