In a raid earlier in October on a Phnom Penh house, police said they found drug-making equipment and 35kg of heroin worth millions of dollars on the streets of Australia and the United States, its likely destinations.
Two-star general Dom Hak, a military intelligence chief, and three Taiwanese and four Cambodians were arrested and charged with drug smuggling following the bust.
The war-scarred southeast Asian nation trumpeted the seizure as a sign of its newfound commitment to combating drugs and staged a very public burning of the heroin even before court prosecutors had kicked off investigations.
The admission of a lack of evidence after such a public display is unlikely to enhance the reputation of Cambodia's notoriously corrupt and erratic judicial system.
"He (Dom Hak) is free this afternoon because the Phnom Penh court has no evidence against him," Defence Minister Tea Banh said.
Officials said the heroin had probably been smuggled down the Mekong River from the notorious Golden Triangle, a drug-rich region where Laos, Thailand and military-ruled Myanmar meet.
Even before a bloody crackdown on drug dealers in Thailand, foreign governments had long seen Cambodia as a favoured smuggling route through Southeast Asia because of its corrupt officials and lack of law enforcement.