In a high-profile case, Jack Marrian, 31, was charged last Thursday after police in the eastern port city of Mombasa seized a 100-kilo (220 pounds) stash of cocaine in a sugar consignment ordered by British firm ED&F Man.
Magistrate Derrick Kuto said Marrian, who has lived in East Africa since early childhood, had to post a bond of 70 million shillings (USD 690,600) with two Kenyan sureties.
Kuto also said Marrian had to surrender his passport given the seriousness of the charge. He could face a life sentence if convicted.
Defence lawyer Sheetal Kapila told AFP he believed the case was driven by the authorities' desire "to stop Kenya being a transit point" for drugs, but in this case, "it's the wrong man who's been picked up."
"Unknown people have smuggled this drug into the consignment," Kapila said.
Mombasa on Africa's east coast has long been used as a hub for drugs bound for Asia and Europe.
The prosecution has appealed against the bail decision on the grounds that the investigation is not yet complete and they believe Marrian is a flight risk.
His family's relationship with Kenya dates back decades, his lawyer said, as Marrian's grandfather had served as a minister in the colonial government just before independence in 1963.
His father David Marrian said he had spoken with his son daily since his arrest.
"We are pleased that the magistrate has given bail and now we have quite a lot of work to do," he told journalists after the hearing.
His father confirmed the firms Marrian works for -- Kenya- and Uganda-based Mshale commodities and London-based ED&F Man -- were backing him "100 per cent".
In a statement released late today, a Mshale spokeswoman said it would continue to provide support "to ensure that justice is done based on facts and evidence; we are confident that Jack will be fully exonerated once the facts are presented."
Roy Francis Mwanthi, a Kenyan facing similar charges, was also freed on a 60-million-shilling bond with two Kenyan sureties. The trial opens on October 3.
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