A U.S. District judge reinstated money bonds yesterday for four defendants in a drug distribution case, asserting that the prosecution did not have sufficient evidence to detain them on allegations that they had offered to pay $25,000 for the murder of the key government witness against them.

Assistant U.S. Attorney George J. Terwilliger III yesterday cited a federal magistrate's earlier finding that the informant who passed a information about the illeged plot to police had a long-proved record of reliability. The magistrate, Lawrence S. Margolis, revoked bonds for all four men on June 15 and ordered them held without pond pending trial.

But yesterday, senior Judge George L. Hart Jr. said that the defendants could not be held without bond since their lawyers have not been allowed to cross-examine the informant, identified only as "S-1." He set a $25,000 bond for each of the four men.

The prosecution has repeatedly refused to identify their source, who told them that the murder plot was directed at John Henry Tate, who is now in protective custody.

The four defendants are Ronald Hinton, 36; Clarence Watts Jr., 38; his brother Thomas Watts, 37, and Joseph Lester Brown, 41. All are charged with distribution of Preludin, known on the streets as "bam." The drug, actually a diet pill, is used as a stimulant and a heroin booster and is considered one of most widely abused drugs in Washington.

None of the men is charged in the alleged murder plot.

The four suspects and a fifth defendant, Marvin Lee Cobb, 30, were arrested June 6 at a hotel here after police staged a drug sale and offered 22,000 Preludin pills, actually lent to police by the manufacturer, at cut-rate prices. Cobb is not accused in connection with the alleged murder plot.

Hinton's lawyer has acknowledged in court that it is his client that the government contends told the informant of the alleged murder-for-hire scheme. But Hinton himself took the witness stand in the federal magistrate's courtroom and denied that he or any of the other three men named by the informant ever considered a murder plot.

Hart said yesterday that he wanted the case tried as soon as possible because of the allegations of threats against the main witness. He set a trial date of Aug. 3 for the Watts brothers, Hinton and another defendant who officials said did not have a principal role in the case. Brown and Cobb will be tried separately. No date has been set for the trial.