New York prosecutors have dropped charges that Lapo Elkann, grandson of late Fiat patriarch Gianni Agnelli, falsely reported he was kidnapped in November in an effort to get ransom money.

The office of Cyrus Vance, the Manhattan District Attorney, said on Wednesday it had declined to prosecute the case but gave no other details.

Elkann, 39, had apparently concocted a fake abduction scheme after running out of cash during a drug-fueled partying binge, a law enforcement source said.

A US defence lawyer for Elkann, Randy Zelin, confirmed there would be no prosecution and said his client was grateful justice had prevailed.