Lilongwe magistrate Viva Nyimba said the arrest was illegal since the Interpol warrant of arrest was not channelled through the Ministry of Homeland Security.
He argued that there was no warrant of arrest from court or authority from the minister of homeland security.
The magistrate ordered that Bushiri and his wife Mary be released “in the interest of justice”.
He threw out the prosecution assertion that the duo was a flight risk, noting that the two had voluntarily surrendered themselves to police and there was, therefore, no risk that they would not comply with further obligations.
The Bushiris are facing charges of theft and money laundering emanating from a US$7 million investment scheme in South Africa.
They have triggered a diplomatic crisis between Lilongwe and Pretoria after they sensationally escaped from South Africa last week while on bail for the case.