The Court of Appeal was told the guilty verdict returned against Luigi Marotta can no longer be regarded as safe due to information not available at the time of his trial.
A Public Prosecution Service lawyer said senior judges should examine the material at a closed hearing before deciding whether to overturn the conviction.
Marotta, 66, was sentenced to five years in jail in 2000 for conspiracy to defraud the Londonderry-based St Brendan's Liqueur Company.
The businessman, with a previous address in Chelsea, London, was alleged to have been part of a plot involving blank cheques stolen from the firm.
His challenge to being found guilty has included attempts to gain access to intelligence documents.
Marotta's lawyers had hoped the documents would show that entrapment may have been used by the security forces.
During a previous hearing it emerged that a police agent using the pseudonym Kevin Fulton claimed to have helped secure the conviction.
The informer said he had worked under cover for the RUC's anti-racketeering unit.
However, it was alleged that Fulton introduced Marotta, also known as 'The Teflon Don', to two co-conspirators before the fraud was organised in 1997.
Lawyers for the Italian contended that the agent's involvement was not fully known during the original trial. Those documents were held to contain nothing relevant to the appeal.
But in court on Friday, counsel for the PPS confirmed that it could no longer be satisfied the original trial was fair or the conviction was safe.
Michael Chambers said the position was based on material revealed to the Prosecution Service, but which was not available at the time.
Judges were told that the original conviction should be quashed.
Mr Chambers urged the court to sit in private to review the information and hear reasons for the new position.
Lord Chief Justice Sir Declan Morgan expressed concern about the issues of open justice. The judge also asked: "If we were persuaded would there be an application for a retrial in this case?"
Mr Chambers confirmed none would be sought. A further hearing will take place in two weeks time to decide how the case should proceed.