State prosecutors suffered a public setback in efforts to combat border violence Wednesday when a judge dismissed high-profile charges against a Phoenix gun dealer accused of arming Mexican cartels.

The case against George Iknadosian, owner of X-Caliber Guns, had been covered on national TV broadcasts and in stories by the New York Times and Wall Street Journal.

But in mid-trial, all 21 counts were dismissed by Maricopa County Superior Court Judge Robert Gottsfield, who decided he had found a flaw in the government's case.

According to a minute entry, Gottsfield concluded that evidence against Iknadosian was not sufficient to support conviction based on a technical legal issue. Because the gun buyers all were eligible to acquire firearms, he said, their deception did not amount to a "material falsification." Consequently, Gottsfield ruled, the evidence did not show felonious conduct by Iknadosian.

Gottsfield issued a directed verdict of not guilty for Iknadosian, 47, who was charged with fraud, money-laundering and other offenses.

About 6,000 narcotics-related homicides were reported south of the border last year. Leading up to trial, Arizona Attorney General Terry Goddard portrayed Iknadosian as a greedy business owner who helped fuel Mexico's bloodshed by supplying more than 700 AK-47s and other weapons to cartels.

Late Wednesday, Anne Hilby, a spokeswoman for Goddard, issued a brief statement: "This office disagrees with the (judge's) analysis. We are already preparing an appeal, and we will continue to put the full strength of this office behind the case."

Iknadosian had pleaded not guilty. Neither he nor his attorney, Thomas Baker, was available Wednesday afternoon.

Iknadosian was accused of selling the firearms to "straw buyers," who then transported weapons to Mexico.

Gottsfield dismissed jurors and granted acquittal in response to a so-called Rule 20 motion sought by Baker. Under Arizona law, Rule 20 holds that a case must be thrown out if the state's evidence is inadequate for conviction.

"There is no proof whatsoever that any prohibited (firearm) possessor ended up with the firearms," he said.

The case was considered a landmark prosecution in part because of cooperation with Mexican authorities, who provided evidence that guns from X-Caliber were used in criminal operations south of the border.

The trial garnered even more attention because it began amid hearings on border violence at the Arizona Capitol and in Washington, D.C. Goddard and ATF agents depicted Iknadosian as among the most prominent U.S. gun dealers providing weapons to narcotics criminals. Working with Sonoran police, he traced guns from X-Caliber to Mexican murders and cartel figures.

About a dozen co-defendants pleaded guilty to felony charges before other judges. Gottsfield's ruling on Wednesday appears to question whether they committed the crimes for which they were convicted.