The Iranian Jewish property entrepreneur Vincent Tchenguiz has been cleared of potential charges after the Serious Fraud Office admitted to "very regrettable errors".
The mistakes involved the SFO's investigation into the collapse of Icelandic banking giant Kaupthing.
Mr Tchenguiz and his brother Vincent, whose vast business portfolios included at one time holdings in Sainsbury's, and stakes in restaurant and pub groups Slug & Lettuce and Mitchells & Butlers, were arrested in a dawn raid last March.
But nearly a year later, the SFO has admitted that the investigation was botched and issued an apology.
In a letter, detailed by the Financial Times, the SFO acknowledged the fact that it "inadvertently miscast" information when obtaining the search warrants and overlooked documents that contradicted the evidence against him.
The brothers have now launched a claim for £100 million in damages against the SFO for "wrongful arrest".
Robert Tchenguiz said in a statement: "My business, my family, and I personally continue to suffer losses as a result of the SFO's unlawful, aggressive and disproportionate action.
"The SFO's conduct has left me with no option but to take legal recourse in order to recover from the extensive financial and reputational damage they have caused, whilst also infringing my civil liberties."