European authorities have targeted an alleged criminal network involved in a €114 million VAT fraud scheme involving cross-border smartphone transactions, as part of an investigation led by the European Public Prosecutor’s Office (EPPO) in Munich, Germany.

Five suspects were arrested in three countries during a coordinated operation this week, while searches and seizures were also carried out in Greece.

Three suspects were arrested in Cyprus, one in Germany and one in Italy at the request of the EPPO. The case is linked to the wider Operation Midas, an investigation into large-scale VAT fraud involving international criminal networks.

According to investigators, the criminal organisation allegedly operated a sophisticated cross-border VAT fraud scheme known as VAT carousel fraud.

The scheme exploits EU rules governing transactions between member states, which are exempt from VAT under certain conditions.

In this case, members of the network allegedly traded smartphones through companies and so-called “missing traders” based in Germany, Albania and Sweden.

Missing traders are companies that participate in commercial transactions and collect VAT from buyers but subsequently fail to remit the tax to the authorities, disappearing or ceasing operations instead.

Through this mechanism, the network is estimated to have caused tax losses of €80 million in Sweden and €34 million in Germany, bringing the total estimated damage to €114 million.

Twelve searches and asset seizures across four countries – Greece’s involvement

According to the EPPO, the five arrested suspects are believed to have established and controlled the fraudulent operation.

With the assistance of national authorities in Cyprus, Germany, Greece and Italy, investigators conducted a total of 12 searches at premises linked to the suspects and companies under investigation.

During the operations, funds totalling up to €80,000 were frozen in bank accounts, while cars and properties were also seized in Cyprus, Greece and Italy.

Greek law enforcement agencies participated in the operation, including the Subdirectorate for Digital Forensic Investigation and Analysis and the Subdirectorate for Financial Crime Investigation, both part of the Directorate for Combating Organised Crime.

The involvement of the Greek authorities formed part of broader cross-border cooperation aimed at tracing financial transactions and investigating the activities of the suspected criminal network.

According to the EPPO’s announcement, law enforcement and investigative agencies from four countries took part in the operation.

In Germany, the Bielefeld Tax Office played a key role in the investigation.

In Cyprus, the participating authorities included the Tax Department, the Police Office for the Execution of European Investigation Orders and Mutual Legal Assistance Requests, the Cybercrime Unit, the Digital Forensics Laboratory and the Financial Intelligence Unit (MOKAS).

In Greece, the operation involved the Subdirectorate for Digital Forensic Investigation and Analysis and the Subdirectorate for Financial Crime Investigation of the Directorate for Combating Organised Crime.

In Italy, the operation was supported by the financial police, the Guardia di Finanza, specifically its unit in Desenzano del Garda.