The Jerusalem Magistrates' Court released the suspect after he posted bail at a sum of NIS 2,000 ($586).
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Police suspect the 26-year old shot Udai Qadous and neglected to report the case after returning home. He was arrested on Wednesday, some five months later.
"If the police peek at the film they will conclude that this is a case that should be shut," defense attorney Ariel Atari said after the court hearing. He was referring to footage shot by an IDF security camera that recorded the shooting.
Atari claimed police were "wasting their time" on the case. "We presented our claims to the judge, who read through the investigation material. She took the hint and the young man is already on his way home," he said, adding that his client, who is a student, plans to attend an exam in economics taking place Sunday.
But Qadous's family was extremely pleased with the arrest. The victim's sister, Suzy, told Ynet her parents had burst out in tears upon learning of it. "He must be tried and punished for what he did," she insisted.
She also rejected claims her brother had been throwing stones. "We don't believe an Israeli court will judge him fairly," she said. "Past experience proves that Palestinians are always discriminated against in the Israeli legal system."
"What is seen in the clip is just part of the general picture of the incident, and I ask, where is the full video clip that can reveal the entire picture?" she said.
Elior Levy, Ynet's Palestinian affairs correspondent, contributed to this report
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