By Nate Raymond

NEW YORK (Reuters) - Two nephews of Venezuela's first lady on trial in New York for drug trafficking on Tuesday scored a significant concession from prosecutors, who revealed they were ripping up a cooperation agreement with a key witness the defense accused of lying.

The unusual development was disclosed by a prosecutor in Manhattan federal court during the trial of Franqui Francisco Flores de Freitas and Efrain Antonio Campo Flores, nephews of Cilia Flores, the wife of Venezuelan President Nicolas Maduro.

Prosecutors have accused the two men of trying to use one of Venezuela's airports to send hundreds of kilograms of cocaine to Honduras for trans-shipment to the United States. Both men have pleaded not guilty.

To back their claims, prosecutors had been relying on a paid informant working for the U.S. Drug Enforcement Administration who posed as a Mexican drug cartel member while meeting with the nephews in Venezuela.

But in the months after the nephews' November 2015 arrests in Haiti, U.S. authorities came to learn the informant, Jose Santos-Pena, and his son, another informant, had been lying to the DEA, while secretly engaging in their own drug deals.

Both Santos-Pena and his son subsequently pleaded guilty to narcotics charges and to lying to the government. Both are in jail. The cooperation deal that prosecutors said is "getting ripped up" would have helped the father avoid serving further prison time.

In court on Tuesday, though, Randall Jackson, a lawyer for Campo Flores, played a series of jailhouse phone recordings that he had said would show Santos-Pena was "continuing the orchestration of drug trafficking from prison."

The recordings also showed a third-party facilitated calls between Santos-Pena and his son. That was despite Santos-Pena on Monday saying he was not supposed to talk to his son about his testimony and had not spoken with him in jail.

Following that, Assistant U.S. Attorney Brendan Quigley reminded Santos-Pena that if he lied, his cooperation agreement could be voided.

Quigley then asked if "you now understand your cooperation agreement is getting ripped up" and that he would not be receiving a favorable letter from prosecutors at sentencing.

"No sir," Santos-Pena said.

"You should," Quigley said.

It was unclear whether the issues with Santos-Pena, who earned over $1 million assisting authorities in various cases, would impact the case.

Prosecutors have relied on other evidence, including one other cooperating witness, covert recordings and electronic messages from the nephews.

(Reporting by Nate Raymond in New York; Editing by David Gregorio)