Judge Alistair McCreath told Southwark Crown Court he believed prosecution witness Mazher Mahmood had lied to the court.
Mazher Mahmood claimed that Tulisa Contostavlos had put him in touch with her rapper friend Mike GLC to supply him with Class A drugs.
The former X Factor judge had denied the allegations.
The judge told the jury the case “cannot go any further” because there were “strong grounds to believe” that Mr. Mahmood had “lied” at a hearing before the trial started.
The court heard that undercover reporter Mazher Mahmood, known as the Fake Sheikh, had posed as a wealthy film producer called Samir Khan when he met Tulisa Contostavlos at several luxury hotels and restaurants.
Mazher Mahmood claimed Tulisa Contostavlos said she could procure cocaine for him when he offered her a lead role in a film.
Tulisa Contostavlos vehemently denied brokering the deal, which was exposed in the Sun on Sunday newspaper in June 2013.
Her co-defendant, Mike GLC, whose real name is Michael Coombs, 36, previously pleaded guilty to supplying half an ounce (13.9g) of cocaine.
Tests later showed the cocaine, which was sold for £820 ($1,300), was at 37% purity.
Michael Coombs will also walk free after the judge said the case could not proceed against him.
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