I don't see the problem. People get convicted based on faulty evidence. The sad fact is it happens. [Yes, that is a problem, but...] Why is cryptography special?
the guy has a file that is pure garbage. not encrypted.
the law officers THINK it's encrypted. the judge orders him to give the key. ...there's no key. it's honestly garbage data.
That's what make encryption special. It were a safe, the police could crack it open somehow. with encryption, they can just claim it's too advanced to be cracked and that will be treated like you are lying.
ignore the mistaken identity, was just a means to reach the false/wrong accusation resulting in the experiment he just did convicting him.