The Electoral Commission yesterday warned internet mogul Kim Dotcom that he risked prosecution for "treating" by holding a launch party.
Dotcom had originally planned to celebrate his 40th birthday and the launch of his new record at an Auckland bash next Monday.
He had also indicated he would launch his new political venture, the Internet Party.
Dotcom revealed, through Twitter, that he has begun the process of registering the Internet Party's logo with the Electoral Commission.
But he pulled the plug on the party this afternoon after controversy over whether it could sway voters. A leaked draft strategy had also suggested rolling out free wi-fi in the new Auckland Upper Harbour electorate.
Using Twitter yesterday, Dotcom indicated his political party would not be launched at the "Party Party" but at a later date.
Despite these tweets, the Electoral Commission advised Dotcom's lawyers last night that throwing the party could still fall foul of the law. The legal team had already been in touch during the day.
Dotcom is not eligible to stand for election to Parliament, but is bankrolling the party.
In an email sent at 6pm, the commission drew attention to Section 217 (2) of the Electoral Act, on "treating".
The rules apply even if the treating is direct or indirect, and outside the election period, and applies to "every elector and not just the promoter of an event such as the Party Party".
The commission went on: "The commission remains concerned that the action Kim Dotcom intends to take (limiting the event to his 40th birthday and the launch of his music album) may not be sufficient to eliminate the risk of the activity falling within the scope of the treating provisions.
"This is because the event was originally intended to include the Internet Party launch, we understand that the event will be called the Party Party and Kim Dotcom is the leader of the Internet Party," the commission said.
"In addition, we understand that the Internet Party's soft launch was to be scheduled for the same day as the event."
The courts have held there must be an intention to influence the votes of those treated, the commission added.
"The commission is concerned that the Party Party may expose both those promoting and attending it to risk of prosecution for treating."
In an email this afternoon, Dotcom apologised for dumping the event, saying he was advised it could breach electoral laws because the tickets were free.
"I apologize, my friends," he wrote."Sadly we must cancel my birthday party after we received advice that the event could risk breaching electoral laws.
Because the tickets were free, we were advised that the purpose of the event could be misunderstood."
He said 25,000 had registered to attend.
"I was looking forward to an awesome event with great live music and other surprises - but the future of NewZealand is more important to me than one night of fun.
"I hope you agree. So we are moving forward with the Internet Party!!"
Dotcom followed the statement with a tweet:
I'm really sad right now :-(
— Kim Dotcom (@KimDotcom) January 16, 2014
An election strategy written by activist Martin Bradbury was leaked yesterday. It had advocating standing in the newly created Upper Harbour area and rolling out free wifi to the area.
This could be considered "treating" - also breaking election rules.
Dotcom said he used Bradbury as a consultant for just two months and rejected his proposals.
A political adviser whose clients include recently freed Russian oligarch Mikhail Khodorkovsky is shooting a campaign commercial for Dotcom's party, the Guardian has reported.
Dotcom told the newspaper he was confident the Internet Party would secure more than 5 per cent of the party vote in the November general election and saw it spawning a world-wide movement against "the surveillance state and attempts to control the internet".
The newspaper reported the campaign ad was being filmed by James Kimmer.
Journalist Alastair Thompson has meanwhile confirmed on Twitter that he would become "interim party secretary" later today.
Dotcom told the Guardian that the Internet Party would "create tech jobs by creating the right environment for companies to come here and establish a presence in New Zealand".
That would involve not allowing government agencies to install "back doors" into computer software.
Political journalist Alastair Thompson was forced to resign after he was linked to the Internet Party. He claimed this morning he was just taking a sabbatical from the internet based news site Scoop Media.
Internet mogul Dotcom told Fairfax Media that Bradbury was engaged as a consultant for two months last year.
"The suggestions in the proposal are not part of our strategy. The project time with the consultant who provided the proposal was limited to 2 months. To declare this document a leak of the Internet Party strategy is simply false," he said.
"We are working with several political consultants with different political views, from the left to the right. We have reviewed several strategy proposals to identify the best strategy options for the Internet Party and it is an ongoing process."
Should the speed limit be raised to 110kmh on some roads?Related story: 110kmh limit moves closer