Is he entitled to any compensation?
The accuser, because they were negligent in 1) securing their files; and 2) making allegations against the victim without appropriate confirmation.
The police, because they were negligent in that they did nothing to verify the allegation before taking some pretty drastic steps (arrest, device seizure) to the detriment of the victim.
However, I'm not aware of any success in this area before. It'd be new legal ground. I'd like to think that there should be some bar of reasonableness in the handling of a "computer crime" where anything below does qualify as negligence - along the same lines as unlawful arrest for any other reason. However I don't think the courts have ever considered such a case. It's impossible to make any claim as to whether compensation is due or not because there's never been an appropriate test case that can be referred to.
If you called up the police, any police anywhere, right now and said "Officer arrest this man, he downloaded a pdf from my server and I have the log.txt file to prove it!", I would honestly be willing to wager the deed to my house that the police would not be banging my door at sunrise to forcibly take me away and interrogate me.
At best it was gross incompetence, at worst abuse of power.