The Marshall Islands High Court has dismissed criminal charges against a local businessman charged with defrauding the government of tens of thousands of US dollars.
The court ruled the government had failed to show that David Chin Tung Lin had knowledge of the criminal activities.
Mr Lin, along with eleven other people, had been charged with stealing more than 500,000 dollars in U.S. federal funding from the Ministry of Health.
He is the first of the group to appear in court.
The decision is seen as the first significant set-back to the prosecution.
The chief prosecutor, Tubosoye Brown, says he plans to file a new set of criminal charges against Mr Lin in an effort continue legal action against him.
Some of the other 11 defendants in the case are awaiting hearings to see if the government has adequate evidence to take their cases to trial.