The Financial Conduct Authority (FCA) decided to drop the case against Patrick Cryne and three other former directors of iSoft after procedural problems caused the trial to grind to a halt.
Mr Cryne, 62, was cleared of wrongdoing along with Stephen Graham, Timothy Whiston and John Whelan following an investigation dating back to 2006.
The investigation by the Financial Services Authority - the FCA’s predecessor - resulted in a first prosecution at which it was alleged the four men conspired to present a misleading picture of the company’s health, for personal gain.
Mr Graham, 49, of Knutsford in Cheshire, Mr Whiston, 45, of Lymm in Cheshire, and Mr Whelan, 46, of Cheadle Hulme in Stockport, denied a single charge of conspiring to make false statements in relation to the company between October 2003 and July 2006.
Mr Cryne himself has never stood trial, due to ill health.
Jurors failed to reach a verdict in the case last year and a retrial was ordered at Southwark Crown Court but it ground to a halt with procedural problems.
A spokesman for the FCA said legal argument arose when old file notes dating to 2009 were disclosed to the defence, resulting in procedural problems that could not be resolved.
The jury was discharged and the FCA decided that it would not be in the public interest to pursue a second retrial.
Not guilty verdicts were formally entered against all four men.
Tracey McDermott, FCA director of enforcement and financial crime, said: “This is of course a disappointing outcome. The problems that have arisen in this case result from a particularly unusual set of circumstances, which are unlikely to recur.”
Martin Wheatley, the FCA’s chief executive, said: “This decision not to seek a second retrial does not undermine our determination to bring and prosecute difficult cases.”
Anthony Barnfather, partner of law firm Pannone who represented Mr Whelan, said: “John has spent the last seven years with these allegations hanging over him, causing immense stress and anxiety.
“He has been unable to work, has suffered great financial loss and his reputation left in tatters. He has also had to endure two four-month trials.
“John has always strenuously denied the allegations and is delighted he can now finally begin to rebuild his life.
“This is the second time the jury has been discharged in this case which has cost the public millions of pounds. We are delighted the prosecution has at last discontinued the matter.”
iSoft, a major healthcare software provider, was bought by Australian firm IBA health in 2007 before being acquired by US group CSC.