Mohammed Yasin was alleged to have taken up to 5,000 from Zubaier Akhter by showing him pictures of men with guns and rocket launchers, pointing a gun at his head and threatening him and his family with death.
But a jury at Dundee Sheriff Court took just half an hour to find Mr Yasin not guilty by majority of the charge following a two-week trial.
The court was earlier told by Mr Akhter of threats allegedly made against him by Mr Yasin.
Giving evidence, he said he was shown pictures of a group of men in what he believed to be Afghanistan. He said: "They were men with big turbans and were carrying guns and rocket launchers. Yasin was in the picture. He was holding a gun. It was a recent picture - maybe three or four years ago
"He told me 'We are powerful people - we do help the Taleban and we are with them'."
He had alleged Mr Yasin told him unless he paid the money he would be deported to Pakistan, and he and members of his family would be killed there.
Mr Akhter added that he had regularly stolen money from the till at his wife's shop - about 5,000 in total - to pay Mr Yasin.
Mr Yasin, 42, of North Erskine Street, Dundee, had denied a charge alleging that he had extorted sums of money from Mr Akhter by threatening and intimidating him between 1 July, 2008 and 29 March, 2009.