OAKLAND -- Matthew Aaron Llaneza pleaded not guilty to charges that he tried to blow up an Oakland Bank of America with a car bomb during an arraignment Friday morning in a federal court.

If convicted he could face life in prison for attempting to use a weapon of mass destruction. His attorney, Jerome Matthews, an assistant federal public defender, said Llaneza was found to suffer from "significant mental illness" but was competent to stand trial.

Matthews asked to set the next date for April 11 because of the "gravity of the case," which involved classified material.

Llaneza, a 28-year-old San Jose resident and former Marine, has been held at the Santa Rita Jail since being caught in an FBI sting operation involving an agent posing as a member of the Taliban.

Authorities accused Llaneza of trying to blow up the Bank of America branch on Hegenberger Road and ignite a civil war by blaming the bombing on anti-government militias. Llaneza would then flee to Afghanistan and train Taliban fighters, according to the criminal complaint filed against him.

The man Llaneza believed was a member of the Taliban and Afghanistan mujahedeen turned out to be an undercover FBI agent.

Federal agents swooped down on Llaneza near the bank after he tried to set off the fake bomb using two cellphones.

Llaneza appeared in a U.S. District courtroom Friday in a red jumpsuit, his hair longer and curlier than in photos taken after his arrest in February. The short black beard that covered his chin and jaw had been shaved. Llaneza was living in a recreational vehicle in front of his father's North San Jose house while the scheme unfolded under the watch of the South Bay Joint Terrorism Task Force.

Civil rights groups argued that the FBI had entrapped Llaneza, who might not have considered trying to carry out the plot if the agent had not approached and assisted him.

Llaneza had a long record of mental illness, according to Santa Clara County court records stemming from a 2011 weapons conviction, including bouts of paranoia, suicidal tendencies, hallucinations and voices in his head. He also had a vast working knowledge of weaponry and had served in the Marine Corps before being discharged for an undisclosed reason.

Llaneza, a self-described "armorist," was arrested in 2011 for illegally having an AK-47 assault rifle and high-capacity magazines he purportedly purchased and registered in Arizona. Court documents showed he took Zyprexa for bipolar disorder and Remeron, an antidepressant.

He converted to Islam and used the name Tarq Kahn before returning to California in 2011.

Instead of life in prison, Llaneza could be sentenced to a five-year supervised release as well as a $250,000 fine.

On Friday, Judge Kandis Westmore told Llaneza those were the maximum penalties but not actual ones imposed on him.