The government filed a motion on Thursday asking a federal judge to "dismiss the indictment and exonerate" Marimar Martinez and Anthony Santos Ruiz, who were involved in a collision, near 39th Street and South Kedzie Avenue, with U.S. Customs and Border Protection agents in Chicago's Brighton Park neighborhood on Oct. 4.
The case was dismissed Thursday afternoon, with prejudice, at the Dirksen Federal Courthouse.
The incident set off street protests on Chicago's Southwest Side.
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Martinez's attorney, Christopher Parente, told ABC News on Thursday that he and his clients are relieved by the government's decision.
"We appreciate the U.S. attorney being thoughtful in agreeing to dismiss this," Parente said.
A Customs and Border Protection agent shot Martinez after a convoy allegedly tried to box in federal agents.
Martinez and Santos Ruiz faced multiple federal charges that could have landed them behind bars for up to 20 years.
The decision to drop the case was a dramatic reversal, and it comes amid questions about the actions of one of the agents involved in the encounter.
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Defense attorneys argued the agent who shot Martinez was responsible for the crash, not the other way around. And earlier this month under questioning, that agent acknowledged he drove his damaged vehicle to the East Coast before defense attorneys could inspect it. He was also confronted with group text messages in which he appeared to brag about the shooting.
After the judge dismissed the charges, Santos Ruiz left without comment. But Martinez, a day care worker, spoke to reporters.
"It's been hard. Honestly, it's been hard, like I can't sleep, but now I'm going to go to sleep," Martinez said. "I just want to thank the judges, all the parents that supported me, everybody that supported me. I'm just grateful for everything."
"This was a bad shoot. It was a violation of CBP's policy. It was a bad shoot. They know it. It's going to come out eventually, but this is the first step, the dismissal of the indictment. That's what we were hired to do, and that's what we did," Parente said. "I mean, the reason this is dismissed is because the facts in those press releases were not true. This case was going to be a winner at trial regardless. These agents are in reports saying things that just are not true. So when you read the next press release, I mean, consider that."
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Despite the DOJ dropping the charges, the Department of Homeland Security doubled down Thursday, maintaining that, "Border Patrol law enforcement officers were ambushed by domestic terrorists. ...Our law enforcement shows incredible restraint and prudence in their exercise of force."
Martinez's attorney says authorities are holding on to his client's vehicle because it's subject to another investigation by another U.S. Attorney's Office, not involving his client. But gave no further details.
"As the United States Attorney has stated repeatedly in his public comments, the U.S. Attorney's Office is constantly evaluating new facts and information relating to cases and investigations arising out of Operation Midway Blitz, the largest ever law enforcement surge in the Northern District of Illinois. This continuous review process applies to all matters-whether charged or under investigation. It helps ensure that the interests of justice are served in each and every case, and that those cases that are charged are appropriately adjudicated through our federal court system," a spokesman for the U.S. Attorney for the Northern District of Illinois said.
ABC News contributed to this report.