The trial of helicopter pilot Wladimir "James" Babaeff had barely begun when the prosecution case collapsed half-way through the cross-examination of the star witness - a former security guard at the department store.

Information surfaced that, if aired to the jury, would have cast doubt on the witness' claim that he was the inside man who set up the robbery for Mr Babaeff and his associates.

Gun-toting bandits went into Melbourne's CBD Myer store in the early hours of August 23, 1993, and handcuffed another security guard to a rail and stole more than $500,000 from the store's cash room.

Mr Babaeff was charged 22 years later - in 2015 - as part of an investigation dubbed Tidelands.

The new police case relied almost solely on the witness' account that he befriended Mr Babaeff and disclosed inside information about Myer's security in exchange for a cut of the haul.

It was money, the witness said, he never received.

But Mr Babaeff's defence barrister Mark Gumbleton said the witness' story was fabricated.

"He is a liar. He is lying. He is lying to you," Dr Gumbleton told the jury.

On the third day of Mr Babaeff's trial, explosive information emerged that pointed to other potential suspects.

Dr Gumbleton told the Melbourne County Court that a woman claimed former Victorian policemen were trying to win the security contract at Myer at the time.

She also claimed cash from the haul had been hidden in investment properties, Dr Gumbleton said.

"She absolutely contradicts everything [the star witness] has to say," he told the court.

That woman, Dr Gumbleton claimed, was not spoken to during the original investigation into the robbery despite police being "absolutely suspicious" of her.

Detectives from the organised crime taskforce Purana spoke to the woman in 2015, the court heard. But she wasn't spoken to as part of the more recent Tidelands investigation, Dr Gumbleton said.

The woman's information was enough to cripple the case against Mr Babaeff.

"This was always a one-witness case," prosecutor Sally Flynn told the court on Tuesday.

She said the failure to disclose the information was inadvertent and the investigator, Detective Senior Constable Matthew Walsh, acted with integrity by subsequently finding the police report on the woman's account despite knowing the ramifications for prosecution.

Much of the information leading to Mr Babaeff's acquittal was heard in legal arguments when the jury was not in the courtroom.

In a highly unusual move, Judge Carolene Gwynn told the surprised jury on Tuesday they would be discharged without requiring them to enter a verdict. The trial had run for only three days.

Mr Babaeff was then called before the court again to enter another not guilty plea before Ms Flynn told Ms Gwynn she had no evidence to lead.

That allowed Mr Babaeff's not guilty plea to stay on the court record and effectively act as an acquittal without preventing police from prosecuting in the future.

Dr Gumbleton told the court on Tuesday he had never seen a situation like it.

"This has unfolded in an extraordinary way," he said.

Mr Babaeff, who was arrested and charged almost two years to the day, always maintained his innocence. He did not make comment outside court after his acquittal.

Another of Mr Babaeff's lawyers, Adam Chernok, indicated they would be seeking costs from Victoria Police.