Action by the FBI to copy data and take it offshore to the US was also deemed unlawful.
"The warrants did not adequately describe the offences to which they related," High Court judge Justice Helen Winkelmann said.
Mr Dotcom was arrested, along with four others, in January.
Millions of dollars in assets were seized or frozen including almost 20 luxury vehicles, dozens of computers and art works.
However, Justice Winkelmann said the warrant for the search fell "well short" of outlining Mr Dotcom's alleged offences.
"They were general warrants, and as such, are invalid," she said.
In response to the judge's decision, New Zealand police said they were in discussions with Crown Law "to determine what further action might be required".
Mr Dotcom's site was said to have made $175m since 2005 by copying and distributing copyrighted material without authorisation.
The site's lawyers have said Megaupload simply offered online storage.
Mr Dotcom is currently on bail.
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Source: http://www.bbc.co.uk/news/technology-18623043
"Megaupload raid warrant 'invalid', New Zealand judge says" :: Login/Create an Account :: 68 comments