Los Angeles County agreed to pay $5 million to the top executive of an election software company who had been arrested and charged in 2022 with mishandling voter data in a case that prosecutors dropped a few weeks later, the executive’s lawyer said this week.

The payment, which settles a lawsuit filed last year, is yet another twist for Eugene Yu, 66, the co-founder of the software company Konnech.

Mr. Yu and his company faced a barrage of right-wing conspiracy theories after the 2020 election including that Konnech, which is based in Michigan, had stored election data in China. Mr. Yu repeatedly denied sending data to China, including in an article by The New York Times about the false claims as a part of coverage of misinformation and elections.

Los Angeles prosecutors later arrested Mr. Yu, raiding his home and workplace. They charged him with embezzling public money by storing data on poll workers in China, a violation of its contract with the county, along with conspiracy to commit a crime. Right-wing media pointed to the arrest as evidence that claims of widespread election interference were true.

Five weeks later, the district attorney dropped the charges, citing concerns of “potential bias in the presentation” of evidence.

Mr. Yu sued Los Angeles County last year, claiming the arrest cost Mr. Yu and Konnech more than $80 million in lost business and other damages. His lawyers called the arrest “politically motivated” and “based solely on utterly false conspiracy theories about Chinese election interference” in a news release announcing the lawsuit.

As part of the settlement of the suit, the district attorney’s office will not pursue charges against Mr. Yu. The office and Mr. Yu will also petition a judge for a finding of factual innocence, according to Mr. Yu’s lawyer.

The district attorney’s office has never clarified whether the company had, in fact, stored data in China. The office and Los Angeles County did not respond to questions about the decision.

Gary S. Lincenberg, who represented Mr. Yu in his criminal trial, said, “Mr. Yu should have never suffered through his wrongful arrest, loss of business or tarnishing of his good reputation.”

“But the settlement in his favor,” Mr. Lincenberg added, “represents a measure of recompense for the wrongs done to him by the wrongful prosecution.”