Megaupload founder Kim Dotcom hailed a "massive" response Sunday to his new file-sharing service with half a million users registering within hours, a year after his arrest in the world's biggest online piracy case.

The mega.co.nz website, which replaces the outlawed Megaupload, went live at dawn ahead of a lavish evening party at the New Zealand-based Internet tycoon's Auckland mansion, on the anniversary of the armed police raid that saw him arrested and the site shuttered.

The 38-year-old German national, who changed his name from Kim Schmitz, is now on bail as US authorities seek his extradition on a range of charges including money laundering, racketeering and copyright theft.

Dotcom hopes the new venture will repeat the success of Megaupload, which boasted 50 million visitors daily, and initial demand triggered overloads that caused long delays in accessing the site.

Despite the disruptions, Dotcom claimed one million visitors to the site in the first 14 hours and more than 500,000 registered users.

"Mega is going to be huge and nothing will stop Mega," he told journalists after earlier targeting US President Barack Obama when he launched Mega with the tweet: "As of this minute one year ago Megaupload was destroyed by the US government. Welcome to Mega.co.nz".

His lawyer Ira Rothken said they were satisfied the new service was legal and Dotcom believed it was the "most legally scrutinised start-up" ever, insisting it would be a torch bearer for online privacy.

The website offers offers cloud storage with state-of-the-art encryption to ensure only users, not the site administrators, know what they are uploading.

That would theoretically stop authorities from accusing administrators of knowingly aiding online piracy, the central allegation facing Dotcom in the Megaupload case.

"By using Mega, you say no to those who want to know everything about you. By using mega, you say no to governments that want to spy on you," he said.

Despite the system overloads, Dotcom expressed delight with the rollout, tweeting within an hour of the launch that there were already 100,000 users registered in possibly the "fastest growing start-up in Internet history".

An hour later, with 250,000 registrations, he said: "Site is still overloaded. Massive demand. Incredible." He said server capacity was on maximum load and that access should improve when the "initial frenzy is over".

Users took to Twitter to complain of difficulties in registering.

"I can't even sign up, it's jammed," one potential user tweeted. "I can't get to the site," added another.

At the launch party, which included a re-enactment of the raid a year ago including actors dressed as police commandos and circling helicopters tagged with the letters "FBI", Dotcom said the site's access issues were being addressed.

"We had a lot of users interested in the site, we've stabilised everything now," he said.

New Zealand Internet consultant Steve Simms said the problems appeared to be linked to delays in servers being updated to recognise the site certificate, as well as the overwhelming number of visitors seeking to sign up.

Dotcom, who has a reputation as a showman, was dressed for the launch in the same attire he was on the day of the raid, and said he still felt resentment at the way he was treated.

"Yes, of course. We didn't expect it at all and felt it was extremely unfair. 220 people lost their jobs overnight."

US authorities allege Megaupload sites netted more than $175 million in criminal proceeds and cost copyright owners more than $500 million by offering pirated copies of movies, TV shows, music and other content.

Dotcom denies the charges, which carry jail terms of up to 20 years.

While on bail in New Zealand, his legal team have enjoyed a number of successes challenging the prosecution case, including a ruling that the police raid was illegal and a government admission that Dotcom was illegally spied upon before his arrest.

His extradition hearing is due to be heard in August.