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Some vape firms in U.S., China have altered their business

model, changed their structure after authorities cracked down

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FDA struggles to contain sales of unauthorised vapes

despite

sales bans

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Big tobacco firms claim illicit vapes impact their U.S.

market

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By Emma Rumney

LONDON, Feb 25 (Reuters) - Some e-cigarette companies

targeted by U.S. authorities have altered their business model

or changed their corporate structure, including by transferring

operations to offshore firms, according to a U.S. regulator and

representatives of two companies.

Such tactics have complicated U.S. efforts to stem the flow of

vapes lacking authorisation into the country, according to the

U.S. Food and Drug Administration (FDA).

"The FDA is aware of, and closely monitoring, instances in

which companies attempt to change the labeling of illegally

marketed products, or the structure of their business, to avoid

detection," it said in a statement to Reuters. The regulator did

not comment on specific brands or companies.

Chinese vape giant Heaven Gifts transferred the ongoing U.S.

operations of its brand Lost Mary, whose products are not

authorised in the United States, to a British Virgin Islands

(BVI) firm - Wonder Ladies Limited - after the FDA banned

several companies spanning China, the U.S. and South Korea from

importing its flagship label Elfbar in 2023, the company told

Reuters. Lost Mary remains widely available in the United

States.

A Texas-based e-cigarette firm, Ludicrous Distro, a trading name

for American Vape Company, stopped selling its own unlicensed

vapes under the brand name Esco Bars, and shifted instead to

distributing a wider variety of unauthorised devices from third

parties, its website shows.

Heaven Gifts spokesperson Jacques Li said the Chinese company

had exited the U.S. market by transferring its U.S. Lost Mary

operations to Wonder Ladies after the FDA ban on Elfbar and that

it was "not sidestepping FDA regulations."

Asked why it was selling unauthorised devices via its

website, Ludicrous Distro declined to give the reason for its

change of approach but told Reuters it had consistently sought

to comply with evolving FDA policies that had created confusion.

The agency, which regulates tobacco and alternative products,

has denied licenses to some 26 million new nicotine devices

since October 2020, FDA data show, especially to fruit and candy

flavoured vapes it says appeal to teenagers.

Some unauthorised products, including Elfbar, Lost Mary, and

Esco Bars, which are legal in other countries, have nonetheless

been sold widely across the United States, the world's biggest

market for smoking alternatives.

Shenzhen-based Heaven Gifts, founded by vape tycoon Zhang

Shengwei, controlled over 9% of the U.S. e-cigarette market in

the year to September 2023, Reuters reported in 2023, driven by

Elfbar.

Lost Mary was the seventh most popular disposable vape

device in 2024, data from market research firm Circana provided

by an industry source and reviewed by Reuters show. Circana said

it was unable to confirm or comment on non-public data.

Li declined to clarify the terms or timing of the transfer

of operations to the BVI company.

Heaven Gifts still owns the U.S. trademark of Lost Mary via its

Hong Kong unit, Imiracle (HK) Limited, according to the U.S.

Patent and Trademark Office's (USPTO) register as of February

2025.

But Wonder Ladies' name and BVI address now appear on Lost

Mary packaging in the United States, a device purchased by

Reuters in December showed.

A Reuters review of company registries found an Imiracle (HK)

Limited director, Tu Xiaoliang, was the authorised

representative in Hong Kong for Wonder Ladies and three other

BVI firms, which all share an office building there. Tu is one

of three Imiracle (HK) Limited directors, alongside founder

Zhang, the filings showed.

Wonder Ladies and the other three BVI firms either own the U.S.

trademark or appear on the packaging for unauthorised vape

brands Lost Mary, off-Stamp, RabBeats, Funky Lands and Quasar.

Tu did not respond to detailed Reuters questions mailed to

her business addresses. All four BVI firms did not reply to

letters seeking comment delivered to their Hong Kong office

address.

Li said he was unaware of Tu's links to the BVI firms and

couldn't explain them. He declined to outline Tu's role at

Heaven Gifts, citing privacy considerations.

Richard Marianos, a former assistant director at the U.S.

Bureau of Alcohol, Tobacco, Firearms and Explosives, said the

BVI firms could serve to distance vaping brands from their

makers and protect associated revenue from enforcement.

A former employee with direct knowledge of the issue also

told Reuters that Heaven Gifts set up the BVI firms to distance

itself from ongoing illegal U.S. sales of Lost Mary and the

other unauthorised labels identified by Reuters.

The person, who was working for the Chinese vaping company

when this strategy was implemented, asked not to be named for

fear of legal reprisals. The source provided no documentary

evidence. Reuters was unable to independently confirm the

person's account.

Reuters could not determine who owns Wonder Ladies, whether

the BVI firm earns income from U.S. Lost Mary sales or whether

revenues flow from the BVI firm to Heaven Gifts.

CONFUSION?

Ludicrous Distro in recent years relied on Chinese

manufacturers to produce Esco Bars, for which it owns the

trademark, USPTO data shows.

But it stopped distributing Esco Bars, the sixth most popular

flavoured disposable vape in the U.S. in the year to June 2022,

after the FDA put it on its red list of banned imports in May

2023, Ludicrous Distro's lawyer told Reuters, adding Ludicrous

Distro now solely acts as a distributor for third party

e-cigarettes and a range of other products.

This transition "was made in a transparent and lawful

manner" and Ludicrous Distro had been "forthcoming with FDA

inspectors about its business operations", the lawyer also

said.

A review of Ludicrous Distro's U.S. website showed the

company was offering dozens of unauthorised devices, including

seven labels flagged as illegal in FDA warning letters to

retailers and in press releases, such as Geek Bar and Raz.

Ludicrous Distro said many unauthorised products, including

from major tobacco companies, remained on the market

unchallenged by the FDA, creating significant confusion around

what is legal to sell.

The FDA's enforcement efforts have faced challenges, including a

lack of funding, but any vape launched in recent years without

authorisation was "completely illegal", said Mitch Zeller, a

former director of the FDA's Center for Tobacco Products. Some

FDA staff have been recently dismissed as part of U.S. President

Donald Trump's effort to downsize the federal workforce.

The FDA has so far authorised just 34 tobacco- and

menthol-flavoured vape products, all by big tobacco firms

including British American Tobacco ( BTI ).

"RIDING ON GLOBAL AWARENESS"

The American Vapor Manufacturers, an industry association,

says the FDA's reluctance to authorise flavoured devices

deprives smokers of legal products that can help them quit.

Three U.S. smokers told Reuters such devices helped them quit

cigarettes.

In 2023 and 2024, BAT, which says illegal devices have eaten

into its U.S. market share, launched two complaints with the

U.S. International Trade Commission (ITC) targeting dozens of

vape brand owners, manufacturers and distributors.

Among the companies BAT accused of patent infringements and

unfair competition were iMiracle (Shenzhen) Technology Co., Ltd,

another Heaven Gifts unit, and American Vape Company, the formal

name of Ludicrous Distro. BAT filed to withdraw one complaint in

January with a view to resubmitting a stronger case later, CEO

Tadeu Marroco said on February 13.

The ongoing complaint named Wonder Ladies and the three

other BVI Firms - Palma Terra Limited, Sailing South Limited and

Marea Morada Limited - noting they appear on unauthorised vape

packaging.

The four BVI firms all list Tu as their representative in

Hong Kong and are listed at the same letter-box BVI address,

Hong Kong company filings show.

BAT and its legal team declined to comment on the ITC

cases.

Li said he had no knowledge of the BVI companies aside from

Wonder Ladies, and Heaven Gifts was not associated with the vape

brands aside from Lost Mary.

The phrase "powered by Lost Mary" appears on the packaging

of one of the other brands associated with the BVI firms.

The label was likely infringing on the Lost Mary name to

"ride on the brand's global awareness", Li said.

($1 = 0.8003 pounds)