While not a fatal blow, the dissolution of Manafort's plea agreement means Mueller is losing the contributions of a witness with deep ties to Russian Federation and who ran the Trump campaign as it took off in mid-2016.
The Special Counsel's Office said it would file a detailed sentencing submission to explain exactly what Manafort's "crimes and lies" are.
A jury in Northern Virginia convicted Manafort of eight counts of financial fraud in August stemming from his work as a political consultant in Ukraine.
Manafort's attorneys disputed the special counsel's characterization.
"A breach relieves the government of any obligations it has under the agreement. but leaves intact all the obligations of the defendant as well as his guilty plea", the court filing said.
Both sides - Robert Mueller and Donald Trump - have been making their own moves to prove their stance valid. And it signals that Mueller's team may be prepared to reveal the depths of what they have learned. That includes a Trump Tower meeting involving Donald Trump Jr. and a Russian lawyer he was told had derogatory information on Democrat Hillary Clinton.
The Monday filing also indicated that prosecutors do not consider Manafort a reliable witness.
The filing was an astonishing break from the bare-bones updates given by the special counsel's office in other cases where cooperators continue to help Mueller pursue Russian interference in the 2016 United States election and alleged coordination with the Trump campaign.
Yet court filings indicate it is fairly advanced, with a focus on whether there is enough evidence in multiple contacts between Trump campaign aides and Russians to support charges of a criminal conspiracy to disrupt the USA election. They are now asking a federal judge to set a date to sentence him.
Both cases stemmed from his Ukrainian political work and undisclosed lobbying work he admitted to carrying out in the U.S. in violation of federal law.
So what did Manafort lie about?
Legal experts said that he could have negotiated a more favorable deal, if he had been able to contribute in the progress of Mueller's probe into Russian meddling.
The news of Manafort's lack of cooperation came in the form of a court filing by federal prosecutors on Monday.
He faced a second trial over charges of conspiracy against the U.S.by acting as the unregistered agent of a foreign government, namely the Kremlin-allied regime of former Ukrainian President Viktor Yanukovych. The former Trump campaign chairman has met with prosecutors at least nine times, amounting to hours of discussions about what he knows.
Mueller has meticulously pursued cases in which Trump associates have lied to investigators, often using such charges as leverage to persuade them to cooperate with prosecutors. Manafort's attorneys denied the allegations. He also faces an additional 10 years in the Virginia case. Mueller's intent on picking the Department of Justice's old money-laundering and FARA cases was obviously to force Manafort to turn on Trump and testify against him on this point.