The European Public Prosecutor's Office has uncovered a group suspected of selling more than 1 million used phones as new to customers across the EU. Buyers lost at least 300 million euros, and the operation spans 19 countries, including Bulgaria, the prosecutor's office says.
Searches and arrests began on Saturday, led by the European Public Prosecutor's Office in Cologne. Police detained seven people in Austria, Germany and Spain, two of them the group's leaders. Bulgaria's National Investigation Service took part in the investigation, codenamed "Troy".
The operation involved 1,770 police, tax and customs officers, who carried out more than 160 searches. Investigators also questioned a witness in the UK.
Investigators say the group put the phones together from used parts in Hong Kong and the United Arab Emirates. Workers then shipped the phones to the Netherlands, cleaned them up and packaged them as new, before storing them in warehouses in Germany and selling them online to customers.
The goods passed through shell companies in Austria, Bulgaria, Germany, the Netherlands and Switzerland, which are suspected of wrongly using a simplified VAT scheme on profit margins since 2018.
Under that scheme, a trader only pays tax on the difference between what they paid for goods and what they sell them for. This only applies to resold items on which VAT has already been paid once. But the phones were declared as new, so tax should have been charged on the full sale price. Several EU countries lost more than 30 million euros as a result. The companies used the margin scheme to sell both to end customers and to each other.
Alongside Bulgaria and Germany, the operation also covers Austria, Belgium, Croatia, Cyprus, Estonia, Finland, Italy, Latvia, Lithuania, Luxembourg, Poland, Portugal, Romania, Slovakia, Spain, Switzerland and the Netherlands.