I notice that in the ChipGuide listing for Babette's Club it mentions that the place was raided in 1943 and that "racing sheets, craps tables, roulette wheels and telephones were seized".

What the source article may have left out is that the chips on the table and in the club cashier were also seized. I'm guessing that the $1, $5, $25, and $100 chips were the ones actually used by Babette's, taken by police, and likely destroyed. The owners perhaps knew that the super high denominations would not be needed and stored them away from the club. They survived and entered the hobby.