Because of the suspicion of millions of fraud involving cell phones sold online, investigators are carrying out a Europe-wide raid with around 160 searches in 19 countries, including Germany. Consumers in the EU are estimated to have suffered damage of at least 300 million euros, according to the European Public Prosecutor's Office (EPPO) in Luxembourg. This means that at least one million cell phones have been sold.
Devices assembled from used parts were sold to those affected as new goods over the Internet. The damage corresponds to the difference between the price paid and the value of the cell phones.
How does the scam work?
According to the investigators, the business practice, which continued until the end, should look like this: In Hong Kong and the United Arab Emirates, mobile phones are initially assembled from used components. The devices are then cleaned and repackaged and sent to the Netherlands. From there they go to camps in Germany.
They can be purchased by consumers across the EU on online marketplaces. More than a million cell phones from “leading manufacturers” are said to have been sold in this way since 2018. The EUPO said it was a top provider of mobile phones on the Internet.
The criminals are also said to have abused a tax regulation through letterbox companies based in EU countries and Switzerland. This resulted in a VAT loss of 30 million euros in several EU countries, of which at least 25 million euros were in Germany, the authority said.
The companies therefore illegally only taxed the profit margin, i.e. the difference between the purchase price of the item and the sales price. This tax regime only applies to resold goods for which VAT has already been paid. However, since the devices were sold as new goods, the tax would have to be calculated on the entire sales price.
Search of warehouse in Krefeld
One focus of the measures was in North Rhine-Westphalia. According to information from the German Press Agency, a warehouse in an industrial area in Krefeld was searched, in which, according to estimates by a reporter from the German Press Agency, there were around 10,000 to 15,000 cell phones.
According to the EPPO, a total of around 1,770 tax, customs and police investigators are involved in the operation. In addition to Germany, the measures are taking place in Austria, Belgium, Bulgaria, Croatia, Cyprus, Estonia, Finland, Italy, Latvia, Lithuania, Luxembourg, Poland, Portugal, Romania, Slovakia, Spain, Switzerland and the Netherlands. A witness is also being heard in the United Kingdom. A large number of digital and analogue evidence had been confiscated and secured, it said.
Arrests over the weekend
According to the EPPO, seven suspects were arrested on Saturday - four in Germany, two in Austria and one person in Spain. These include the two alleged leaders of the organization.
The EUStA coordinated the measures together with the Essen customs investigation office, the North Rhine-Westphalia State Office for Combating Financial Crime (LBF NRW) and the Düsseldorf police. The authorities are also investigating the case for import smuggling, violation of trademark law and the formation of a criminal organization.
The EPPO (in English: Eppo) prosecutes offenses that affect the EU's financial interests. This includes VAT fraud, but also the misuse of funding, money laundering or corruption.
