Valletta-Malta's Prime Minister Joseph Muscat will step down on January 18, party sources told AFP Saturday, following mounting criticism of his response to the murder of journalist Daphne Caruana Galizia.
The Maltese government accepted Theuma's pardon request but later turned down another request for a pardon by Fenech.
Caruana Galizia, 53, was killed by a auto bomb as she drove out of her home in Bidnija, seven miles (11 km) from Valletta, just half an hour after writing a blog describing Schembri as "a crook".
Muscat, who has vowed to resign if links were found between himself and the murder, said Friday he would remain in power, telling reporters he wanted "this case to be closed under my watch".
The prime minister expressed "deep regret" for Caruana Galizia's murder and spoke of the need for a "fresh page".
Last year, a Reuters investigation revealed that Mr. Fenech was the owner of 17 Black, which was named in e-mails uncovered by Malta's financial regulators as the vehicle to fund the secret Panamanian companies.
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Cardona had announced last week that he was "suspending himself" as the investigation into the killing of Caruana Galizia, a mother-of-three, in a brutal attack implicated top government officials.
What did the cabinet decide overnight?
The reason why the arrest prompted calls for his resignation was because Yorgen Fenech's name was instantly recognised in Malta as the man involved in a corruption scandal that has dogged the government for years. "We are asking for the resignations of the police commissioner, the attorney general and the finance minister".
Both Mizzi and Schembri, close allies to the prime minister, have denied any wrongdoing. Prime Minister Joseph Muscat refused to issue a pardon on Friday. A 2018 investigation by Reuters news agency indicated that one of the companies from which they aimed to make money was owned by Fenech.
Police sources have said they regard Fenech as having masterminded the plot.
The businessman has filed a request for President George Vella, and not the cabinet, to consider his request for a pardon, alleging a conflict of interest. It was organized by civil society, human rights and transparency groups such as Repubblika, which gained strength and authority after Ms. Caruana Galizia's murder.
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The prime minister told parliament the suspect, Melvin Theuma, was being given immunity in return for information about the killing. Maltese reports suggested he had audio recordings linked to the case.
Schembri, who was arrested on Tuesday in connection with the murder but released without charge on Thursday, has not commented since his resignation or arrest.
What do we know about the murder inquiry?
The announcement came after two weeks of mounting pressure and popular protests calling for Muscat to quit for his handling of the probe into Caruana Galizia's auto bomb killing. They were arrested in December 2017 and pleaded not guilty in pre-trial proceedings.
Muscat had called the snap legislative elections called after his close entourage was accused of corruption by journalist Daphne Caruana Galizia. The killings earned the trio 150,000 euros (£132,000),.
"I reiterate my deepest regret that a person, who, with all her positive and negative qualities and contribution toward the democracy of our country, was killed in such a brutal way, " Muscat said.
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"I immediately denied that the letter came from me when the police were interrogating me and I stand by that completely", Mr Schembri told the Times of Malta.