The Manhattan District Attorney said it had declined to prosecute the case but gave no other details.

Elkann apparently concocted a fake kidnapping scheme after running out of cash during a drug-fueled partying binge, a law enforcement source had said after his arrest two months ago. Elkann had been taken into custody at the time, according to the sources.

A U.S. defense lawyer for Elkann, Randy Zelin, confirmed there would be no prosecution and said his client was grateful that justice had prevailed.

"The District Attorney's Office conducted a thorough and exhaustive investigation and determined my client had not done anything criminally," Zelin said.

He declined to provide details of what the investigation showed. Earlier reports about the incident had amounted to "false news," he added.

Elkann, who along with his older brother, Fiat Chrysler (>> Fiat Chrysler Automobiles NV) Chairman John Elkann, is an heir to Italy's biggest industrial dynasty. Lapo Elkann nearly died of a drug overdose in 2005 after collapsing in the apartment of a transsexual prostitute.

(Reporting by David Ingram; Additional reporting by Nate Raymond; Editing by Chizu Nomiyama and Jeffrey Benkoe)

By David Ingram