tiffany jewelry outlet Former IMF chief Dominique Strauss-Kahn has been released from house arrest and had his $6m (£3.7m) cash
bail and bond returned amid doubts over the credibility of his accuser.
Prosecutors have agreed that Mr Strauss-Kahn should be freed "on his own recognisance", meaning he must simply promise to appear in court.
He is accused of sexually assaulting a maid in a New York hotel on 14 May.
The case is now close to collapse, US media reports say.
The 62-year-old French politician - who had been seen as a leading candidate for the French presidency - appeared in court in New York on Friday over the sexual assault case.
'Substantial change'
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After assessing disclosures by prosecutors from the office of the Manhattan district attorney, a judge rescinded the strict bail terms imposed on Mr Strauss-Kahn, but did order
that his passport be retained so he could not travel outside the US.
In a letter submitted to the court prosecutors said that the maid gave false testimony to a grand jury, omitting the fact that she cleaned another room before alerting a
supervisor to her claims of sexual assault.
"I understand that the circumstances of this case have changed substantially, and I agree the risk that he would not be here has receded quite a bit. I release Mr Strauss-Kahn
at his own recognisance," Justice Michael Obus told the court on Friday.
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"In the meantime there will be no rush to judgment on this case," Mr Obus said.
On the court steps, opposing lawyers each maintained their case.
"I want to remind all of you that at each appearance in the last six weeks, we asked you and asked the world not to rush to judgement - now I think you can understand why," said
Mr Strauss-Kahn's lawyer, William Taylor.
"We believe the next step will lead to the complete dismissal of the charges," he added.
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After Friday's hearing, Mr Strauss-Kahn strode out of court smiling, with his wife on his arm.
In earlier court hearings, prosecutors had spoken of the strength of their case. One attorney said the proof against him was "substantial".
Now prosecutors believe she may have lied under questioning and could have links to drug dealers and money-laundering.
Mr Thompson said that though the maid "may have made some mistakes", that does not mean the assault never occurred.
Following the twists to the sexual assault case on Friday, hopes among some have been raised about the possibility Mr Strauss-Kahn may once again be able to compete with Nicolas
Sarkozy for the French presidency in 2012.
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The Socialist former Prime Minister, Lionel Jospin, said: "It's a thunderbolt - but in the opposite direction this time."
But it was too soon to say whether Mr Strauss-Kahn might stand, he added.
"If we hypothesise that Dominique is cleared of all suspicion and all charges, which I obviously hope will happen, then it will be first down to him to decide... and then it
will be down to the Socialists to decide."
"It's too early to transform into politics what is so far a human drama which is developing before our eyes."
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Mr Strauss-Kahn had been under house arrest in a New York apartment since posting a $6m (£3.7m) cash bail and bond in May.
He is charged with seven counts including four more serious felony charges - two of criminal sexual acts, one of attempted rape and one of sexual abuse - plus three misdemeanour
offences, including unlawful imprisonment.
Mr Strauss-Kahn, who resigned as head of the International Monetary Fund to defend himself, vigorously denies the charges.
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