"If the defendant were to flee, this would be a diplomatically significant failure of the United States to live up to its obligations to Peru under the (extradition) treaty," Magistrate Judge Thomas S. Hixson said before ordering Toledo, 73, held pending an extradition hearing scheduled for July 26.
U.S. Marshals detained Toledo at his Northern California home Tuesday on an extradition request.
The ex-president is wanted in his home country on accusations of taking $20 million in bribes from Brazilian construction company Odebrecht.
Toledo denies the charges.
Assistant U.S. Attorney Elise LaPunzina told Hixson that the cash and the fact that Toledo has ties to other counties made him a flight risk. She said his wife, former Peruvian first lady Eliane Karp, is from Israel, a country that does not have an extradition agreement with Peru.
Toledo's attorney, Joseph Russoniello, argued for the former president to be released on bail, saying he has deep ties to the San Francisco Bay Area, where he came in the late 1960's to study economics.
Russoniello said the cash was his wife's money, and it was being used to pay for the couple's expenses.
Karp declined to comment after the hearing, saying only the word "liars" in Spanish as she walked out of the courtroom.
Toledo was Peru's president from 2001 to 2006 and has lived in California in recent years, defying orders from his country's courts to return to Peru to face charges.
He had been a visiting scholar at Stanford University as recently as 2017, though the school has said it was an unpaid position. He earned a doctoral degree in education and two master's degrees from the university.
In March, he was arrested in Menlo Park on suspicion of public drunkenness at a restaurant but was released without charges. Peruvian authorities were coordinating his extradition at the time of his arrest, but they didn't request holding him on the minor offense.
Odebrecht in 2016 acknowledged in a plea agreement with the U.S. Justice Department to paying $800 million to officials throughout Latin America in exchange for lucrative public works contracts. The scandal also has tainted the careers of other former presidents in Peru who are under investigation for ties to Odebrecht.
In April, former President Alan García killed himself with a gunshot to the head as officers waited to arrest him on corruption charges.
Toledo's arrest was the latest chapter in what has been a stunning fall from grace for the man who rose out of poverty to become Peru's first president with indigenous roots.
He grew up shining shoes and selling lottery tickets in northern Peru, one of 16 children, at least seven of whom did not survive to adulthood. His life took an unexpected turn when he met two American humanitarian workers. With their help, he applied for and won a scholarship to the University of San Francisco.
His jovial nature, ease with the masses and opposition to strongman Alberto Fujimori helped him clinch the presidency in 2001. He proudly called himself "El Cholo" - a term referring to his indigenous ancestry.
The nation's economy boomed under his leadership, with annual growth in the gross domestic product rising from 0.2 percent to 6.8 percent.
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