Officials allege that three of the 16 Palestinian immigrants charged had links to known terrorists.
The state’s attorney general said investigators had recovered only “a fraction” of the proceeds from sales of more than a million untaxed cartons.
BBC reports that the amount of money involved remains unclear, but records show the suspects deposited at least $55m (£36m).
The scheme cost the state an estimated $80m in tax revenue, said officials in a press conference on Thursday.
The alleged ringleaders, brothers Basel and Samir Ramadan, were arrested on Wednesday in Maryland.
Investigators said they had found $1.5m in cash – some stashed in black plastic bin bags – in the home and car of Basel Ramadan.
According to police, the scheme involved buying large quantities of cigarette cartons from a wholesaler in Virginia, hiding them in a public storage building in Delaware and bringing them to New York City and upstate New York for sale at markets and grocery stores.
New York City Police Commissioner, Ray Kelly, said that one of the suspects used to run a business in the 1990s partly funded by Omar Abdel-Rahman, a blind cleric serving a life sentence for a conspiracy to blow up New York City landmarks.
Another was the “confidant”, Mr. Kelly said, of a Lebanese immigrant convicted of a deadly shooting attack in 1994 on a van full of Jewish students on Brooklyn Bridge.