On Wednesday, the European Public Prosecutor's Office (EPPO) in Munich and Cologne, took action against a "carousel" scheme orchestrating a tax fraud of €195 million. This operation also involved searches and arrests in 16 other countries, including Cyprus, both within and outside the European Union.

During the investigations, items such as smartphones worth a total of €15.3 million, a yacht valued at €3 million, and €1.2 million in cash and cryptocurrencies were seized. Several luxury cars, including a Rolls-Royce, a BMW, and a Range Rover, were also confiscated. Additionally, jewelry, luxury watches, and 2.5 kilograms of gold were found in the suspects' residences.

The operation, which EPPO announced on Thursday, targeted an alleged criminal organization accused of orchestrating a massive VAT fraud of €195 million through the sale of smartphones, small electronic devices, and face masks.

Led by the EPPO's investigative team Midas, over 180 searches were conducted, and 14 individuals were arrested in 17 countries (Albania, Austria, Croatia, Cyprus, Czech Republic, Estonia, Germany, Hungary, Italy, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Sweden, and the United Kingdom). The investigation was supported by over 680 tax and police investigators.

The EPPO did not disclose more details on the number of seizures and arrests per country.

The "carousel" VAT fraud is a complex criminal operation that exploits EU rules for cross-border transactions between member states, transactions that are exempt from value-added tax.

Specifically, according to EPPO, a German company has been leading several different VAT fraud schemes since 2017, involving the trade of small electronic goods, including smartphones. The suspects used a chain of sellers who disappeared without fulfilling their tax obligations.

In 2020, the heads of these VAT fraud mechanisms entered the market for protective face masks amid the Covid-19 pandemic. The company managed by the suspects is believed to have purchased masks from a dealer who then vanished. The masks were channeled through various intermediary companies to conceal their final destination.

Although officially based in Hong Kong, the protective masks were actually stored in Germany and remained there until purchased by the German Federal Ministry of Health. The investigation revealed that neither the company at the beginning of the supply chain nor the Hong Kong-based company returned the VAT collected during the sale of the personal masks to the Ministry.

Investigators believe the suspect criminal organization covered its activities through shell companies, "straw men," fake identities, and secret communications.