A Manhattan court dismissed a $250 million civil tax fraud case against Russian-American businessman Felix Sater on Wednesday, Business Insider has learned.

The civil tax-fraud case against Sater, a former associate of President Donald Trump, and the real-estate company he cofounded, Bayrock, was being prosecuted as a qui tam case, which allows a whistleblower to file on the state's behalf. The attorney general's office can then choose to intervene or not.

The purported whistleblower in this case was a lawyer named Fred Oberlander, who at one point represented Sater's former business partner Jody Kriss in a money-laundering suit against Bayrock.

Oberlander acknowledged Wednesday that he had filed his qui tam complaint based on information that had been stricken by federal judges from Kriss' original complaint, an attorney who attended the hearing on Wednesday told Business Insider.

The attorney said "the argument did not go well for Oberlander, and it seemed likely that the complaint would be dismissed based on Oberlander’s use of information that the federal judges had previously ordered removed from the federal complaint as confidential."

Sater and his lawyer, Robert Wolf, confirmed afterward that the case had been dismissed.

Attorney General Eric Schneiderman's office declined to intervene in the case last year. He sent a letter in February 2016 notifying the New York Supreme Court of a "misleading" press release Oberlander had issued claiming that Schneiderman had green-lighted the case, "when in fact the State had expressly declined to intervene," Schneiderman wrote.

The attorney general's office said it would continue to monitor the case going forward to protect the state's rights and interest.

Wolf, Sater's lawyer, said the case was dismissed "on the merits," rather than on procedural grounds. He noted that Oberlander and another lawyer involved in the case against Sater, Richard Lerner, have twice been referred to the DOJ for criminal contempt "regarding their misconduct" in the proceedings against Sater.

Lerner told a reporter he plans to appeal the decision to toss the qui tam case.

The initial lawsuit brought against Sater and Bayrock in 2010 by Bayrock's former finance director Jody Kriss — who had no hand in the qui tam case brought later by Oberlander — alleged that "for most of its existence [Bayrock] was substantially and covertly mob-owned and operated," engaging "in a pattern of continuous, related crimes, including mail, wire, and bank fraud; tax evasion; money laundering; conspiracy; bribery; extortion; and embezzlement."

Kriss accused Sater and Bayrock's founder, Tevfik Arif, of cheating him out of millions of dollars via fraud, money laundering, and racketeering, among other misconduct. In December, a New York judge ruled that the lawsuit could move forward as a racketeering case.

According to that complaint filed by Kriss, Sater and Arif began negotiating with the Trump Organization in 2003 to market certain projects under the Trump brand but didn't tell Trump about Sater's criminal past.

In a 2007 deposition, Trump said his organization would never have agreed to partner with Bayrock on the development of Trump SoHo had he known about Sater's past. Trump also said he would not be able to identify Sater if they were in the same room.

Bayrock's office was once two floors below Trump's in Trump Tower on Fifth Avenue. A person familiar with the matter, who requested anonymity for fear of retribution by Sater or his associates, told Business Insider previously that Sater and Trump had standing meetings each week.

Sater has said in a deposition that he met with Trump "on a constant basis," Bloomberg previously reported, and Kriss told the publication that Trump valued Sater's loyalty — and his Russia connections.

"It's ridiculous that I wouldn't be investing in Russia," Trump said in the 2007 deposition. "Russia is one of the hottest places in the world for investment."