A man described as an arms dealer pleaded not guilty Friday to charges he delivered a shoulder-fired missile to people he thought were terrorists and offered to obtain a "dirty bomb."

Hemant S. Lakhani (search) did not speak during his 10-minute arraignment. He has been held without bail since his arrest in August following a sting operation.

"He is far from a terrorist," Lakhani's attorney, Henry E. Klingeman, said outside court, saying his client poses no threat. "He is a 69-year-old Hindu from London by way of India."

U.S. Attorney Christopher J. Christie argued that Lakhani should remain detained, asserting the British citizen would be dangerous and likely to flee if released. He said the investigation was continuing, and that discussions were continuing with lawyers for two others arrested with Lakhani.

Prosecutors have said they have recorded conversations and a video taken before Lakhani's arrest showing him handling an anti-aircraft missile in a hotel near Newark Airport (search).

The shoulder-fired missile was a fake, provided by undercover Russian agents working with the FBI, but Christie said Lakhani believed he was obtaining the weapon for a man representing a Somali terrorist group. Lakhani said the missiles could be used most effectively in terrorizing America if 10 to 15 commercial aircraft were shot down simultaneously, Christie said.

The indictment returned last month also charged that Lakhani offered to obtain anti-aircraft guns, tanks, armored personnel carriers and radar systems.

Lakhani faces one count of attempting to provide material support to terrorists, which carries up to 15 years in prison; one count of unlawful brokering of foreign defense articles, which carries up to 10 years in prison; two counts of money laundering, each of which carry up to 20 years in prison; and one count of attempting to import merchandise into the U.S. by means of false statements, which carries up to two years in prison.

The others arrested with Lakhani were Yehuda Abraham (search), 76, a New York diamond dealer, and an Indian citizen, Moinuddeen Ahmed Hameed (search), 38. They are charged in an FBI complaint with conspiring to operate an unlicensed money transmitting business. The charge carries a maximum penalty of five years in prison and a $250,000 fine.

Abraham is free on $10 million bond; Hameed is being held without bail.