New Zealand is investigating whether the country’s intelligence agency illegally spied on Kim Dotcom.
Prime minister John Key has launched a inquiry into "unlawful interception of communications" by government agents in the lead-up to the arrest of the Megaupload founder, Reuters reported.
Dotcom was arrested in January after police raided his New Zealand mansion at the request of the FBI.
US prosecutors want him extradited to face charges of internet piracy and breaking copyright laws.
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However, they have already encountered a snag, with a New Zealand court ruling in June that search warrants used in the raid were illegal.
Now Key has asked the government's Intelligence and Security division to investigate "circumstances of unlawful interception of communications of certain individuals by the Government Communications Security Bureau", his office said in a statement on Monday.
TVNZ cited a memorandum filed in the High Court as saying that the bureau used illegal methods to locate individuals who were then issued with arrest warrants.
Key, meantime, expressed disappointment at the suggestion that any part of the investigation into Dotcom was carried out illegally.
"I expect our intelligence agencies to operate always within the law. Their operations depend on public trust," he said, TVNZ reported.
"I look forward to the Inspector-General's inquiry getting to the heart of what took place and what can be done about it."
Dotcom welcomed the investigation, with the New Zealand Herald quoting his lawyer, Greg Towers, as saying:
"At the end of the day, until we get the outcome of the inquiry we really don't know to what extent there has been illegality. We know it's been illegal because they've admitted it."