The undercover reporter, who works for The Sun, claimed that Ms Contostavlos, 26, had boasted that she could get cocaine for him and put Mr Mahmood in contact with in touch with her rapper friend Michael Coombs. Mr Coombs later admitted supplying the Class A drug.
However, despite his plea, the case against Mr Coombs was also dropped.
The judge told the court that Mr Mahmood’s evidence had been ‘entirely inconsistent’ and that a witness changed his statement after speaking to him.
Mr Mahmood has been suspended from The Sun and could face perjury charges.
The Times reported that after leaving the court, Ms Contostavlos joyfully punched the air and hugged her family and friends.
“This whole case was a horrific and disgusting entrapment by Mazher Mahmood and the Sun on Sunday newspaper,” she said.
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