By Timothy S. Donahue

Top Takeaways:

• BVI victory: A judge says liquidation applications targeting 30 companies linked to Chen should be dismissed for insufficient admissible evidence.
• Cigar interests: The decision could affect control of companies in the ownership chain behind Tabacalera and Habanos.
• U.S. challenge: A November 2 motion seeks to terminate powers granted to the BVI liquidators in a related New York bankruptcy proceeding.

Chen Zhi’s cigar empire may be returning to its directors, but the legal fight is far from over.

A British Virgin Islands (BVI) judge has rejected evidence supporting the liquidation of 30 companies linked to Chen, potentially reshaping control of business interests tied to the Spanish cigar company Tabacalera and its indirect stake in Habanos S.A., the Cuban premium cigar distribution joint venture.

On October 21, High Court Justice Gerhard Wallbank announced that the BVI Attorney General’s liquidation applications should be dismissed because the government failed to present sufficient admissible evidence to justify liquidating the companies.

“Evidence is required of objectionable business practices or other reasons for winding up companies. Mere association is not enough,” Wallbank said.

The government relied on U.S. criminal and civil forfeiture filings, international sanctions, and corporate connections to Chen. Wallbank questioned why authorities had not obtained underlying evidence supporting the allegations.

“So, where we are left with, as you will read, is that there are allegations, there are associations, but the authorities constrain me to say that that is not enough to wind companies up,” he said.

The ruling addresses the requirements for liquidation under BVI law. It does not determine Chen’s guilt or innocence, nor does it invalidate separate U.S. criminal charges, cryptocurrency forfeiture proceedings, or international sanctions.

Paul Kennedy and Grant Carroll of Campbells, attorneys of record in the BVI and representing 25 of the companies, emphasized the distinction.

“The applications concerned whether liquidators should be appointed over each company under BVI insolvency law,” they said. “It is not our role to comment on allegations made against third parties in proceedings elsewhere, and we do not do so.”

For the cigar industry, the stakes extend to Tabacalera’s ownership structure, which, through Allied Cigar Corporation, holds 50% of Habanos, the state-controlled distribution arm for Cuban cigars. BVI-incorporated Simply Advanced Limited, one of the companies involved in the proceedings, holds an indirect interest in that structure.

Uncertainty about Chen’s ownership interests has already affected the premium cigar trade.

Tabacalera previously informed distributors that it considered itself subject to European Union sanctions, and banking and compliance restrictions disrupted parts of the European Habanos distribution network.

Even if the BVI liquidation proceedings conclude, those sanctions and related commercial restrictions will not automatically disappear.

Kennedy and Carroll said the court has requested an orderly transition, with Cosimo Borrelli, formerly head of Kroll Asia, expected to oversee the companies as an independent fiduciary.

“It is intended that Cosimo Borrelli, the former head of Kroll Asia and representative for the companies in BVI, would be the independent fiduciary in charge of all of these companies going forward,” they said.

Borrelli was appointed the sole director of 25 companies in February and has challenged the provisional liquidators’ authority. However, the transition has not begun under a final discharge order.

Wallbank expressly declined to dismiss the applications or to remove the liquidators immediately. “I’m not making that order right now,” he said, citing the need to protect operating businesses and employees during the transition.

“No order has yet been made dismissing the applications or discharging the provisional liquidators,” Kennedy and Carroll confirmed. “The Court has said that the timing and manner of discharge, and any stay, will be decided at the consequentials hearing.”

The written judgment is expected sometime after November 6. A further hearing has been proposed for December 8–9, subject to court scheduling, with an operative order expected at or after that hearing.

An appeal is still possible. “We expect there will be appeals, as is normal in any process, but that the ruling of the BVI court will be upheld,” Kennedy and Carroll said.

The decision is already affecting related proceedings overseas. On November 2, Borrelli and attorneys for the law firm Boies Schiller Flexner filed a motion in U.S. Bankruptcy Court in New York seeking to terminate the automatic and discretionary relief granted to the provisional liquidators under Chapter 15 of the Bankruptcy Code.

The motion argues that Wallbank’s announcement undermines the justification for the liquidators’ continued U.S. powers. It also challenges their ongoing efforts to obtain information and exercise authority as the BVI court prepares its final orders.

According to the filing, a Hong Kong court also stayed related recognition proceedings on November 2.

Those developments do not directly affect the separate U.S. criminal and cryptocurrency forfeiture cases. In October 2025, American authorities charged Chen with conspiracy to commit wire fraud and conspiracy to commit money laundering and sought forfeiture of approximately 127,271 bitcoin, valued at about $15 billion at the time.

Chen’s attorneys have challenged the forfeiture complaint, including the alleged link between the cryptocurrency and criminal activity and the circumstances surrounding the government’s acquisition of the assets.

A spokesperson for the Prince Group of companies welcomed the BVI decision, arguing that it exposed broader problems with international actions targeting Chen and his businesses.

The group maintains that Chen is innocent and alleges that the U.S. indictment and forfeiture complaint contain significant factual errors, including misrepresentations in photographs and allegations it describes as mathematically and chronologically impossible.

“From the beginning, Chen Zhi and the Prince Group of companies have shown that the U.S. indictment and forfeiture complaint are flawed and riddled with obvious errors,” the spokesperson said.

The statement also claims that Chen was abducted to China and is unable to defend himself. The group accused U.S., U.K., and other authorities of relying on unproven American allegations to freeze and seize privately held assets. Those allegations have not been established by the BVI decision.

“Chen and the Prince Group of companies are victims of a geopolitical tug of war over a very real crisis—but one with which we had nothing to do,” the spokesperson said.

The group argues that Wallbank’s decision should prompt courts elsewhere to scrutinize the evidence in related proceedings. “The British Virgin Islands became the first jurisdiction to recognize that the due process of the law requires more than hearsay and innuendo,” the spokesperson said. “It requires evidence.”

The spokesperson described the international actions as an “American-led cash grab” and pledged to continue challenging them. However, the BVI ruling does not determine the validity of the separate U.S. criminal allegations, forfeiture proceedings, or international sanctions.

For Tabacalera, Habanos, and their commercial partners, the immediate question remains whether the anticipated return of control will result in meaningful operational changes.

The BVI court has indicated that the liquidation effort should end. However, until the final orders take effect and the companies navigate the remaining sanctions and legal restrictions, the future of Chen’s cigar interests remains uncertain.