EPPO: Hermes Mobile Phone VAT Fraud Investigation Detains 62, Seizes €310M

• The European Public Prosecutor’s Office (EPPO) conducted a major operation, 'Hermes', on 7 October 2026, targeting a €410 million VAT carousel fraud involving mobile phones and electronics.
• Over 300 searches were executed in eight EU countries, leading to the detention of 62 suspects in Portugal (39), Spain (20), and Italy (3).
• Authorities seized or froze assets worth up to €310 million, including bank accounts, company shares, real estate, luxury vehicles, and €9 million in cash and gold.
• The fraud involved two collaborating criminal syndicates that exploited VAT exemptions on intra-community transactions through a network of intermediary companies and 'missing traders'.
• The investigation revealed the criminals' use of encrypted communication, money laundering services, and a strategy of geographical reallocation to evade detection, with some individuals linked to prior EPPO probes.

The criminal scheme under investigation, a complex form of EU missing trader intra-community fraud, is estimated to have caused at least €410 million in VAT losses to several EU Member States.

The European Public Prosecutor’s Office (EPPO) announced a significant enforcement action on 7 October 2026, targeting sophisticated criminal organizations involved in a large-scale carousel VAT fraud scheme. This operation, code-named ‘Hermes’, resulted in the detention of 62 suspects across Europe and the execution of over 300 searches in eight different countries. The coordinated raids took place in Austria, France, Germany, Italy, Malta, the Netherlands, Portugal, and Spain, focusing on the homes of suspects, offices of companies linked to the organized crime groups, and premises of tax advisers, lawyers, and transport companies.

Authorities detained 39 individuals in Portugal, 20 in Spain, and three in Italy as part of this extensive EPPO Investigation Hermes mobile phone VAT fraud probe. Law enforcement also secured orders to seize assets valued at up to €310 million. Among the assets frozen or confiscated were bank accounts, company shares, real estate, and various vehicles, including luxury cars. Additionally, cash and golden coins amounting to €9 million were seized, underscoring the substantial financial scale of the criminal enterprise.

The criminal scheme under investigation, a complex form of EU missing trader intra-community fraud, is estimated to have caused at least €410 million in VAT losses to several EU Member States. The perpetrators exploited VAT rules governing intra-community transactions, which are exempt from value-added tax when goods move between Member States. They established an intricate network of intermediary companies across Spain, Italy, Portugal, Austria, France, and Malta.

This network facilitated the trading of mobile phones and other electronic devices through a fraudulent chain of entities. The core of the fraud involved 'missing traders' who would vanish without fulfilling their tax obligations, while other companies within the fraudulent chain would subsequently claim VAT reimbursements from national tax authorities, effectively siphoning funds from public coffers. This cross-border electronics VAT fraud highlights the vulnerabilities in international trade systems that sophisticated criminal groups exploit.

Investigation ‘Hermes’ revealed the involvement of two distinct criminal syndicates that collaborated to maximize their illicit gains. These groups are suspected of operating separate carousel fraud schemes but frequently utilized each other’s companies, businesses, goods, and logistics functions. They also channeled criminal proceeds through each other’s entities as part of their money-laundering activities and employed encrypted communication to coordinate their actions, demonstrating a high level of organization and sophistication.

Notably, these criminal groups exhibited a similar modus operandi and, in some instances, involved individuals previously implicated in other EPPO investigations, specifically ‘Admiral’ and ‘Moby Dick’. The investigation also uncovered their strategy of geographical reallocation; after being active in other countries, they moved to new locations to continue their fraudulent activities undetected. One suspect, formerly a leader of a VAT fraud network targeting Sweden between 2019 and 2023, relocated to Portugal after Swedish authorities investigated his scheme and his companies went bankrupt. There, he established a similar large-scale VAT fraud operation by creating new companies through relatives and trusted associates, with this branch also offering money laundering services to other criminal groups.

This extensive operation underscores the European Public Prosecutor's Office VAT enforcement capabilities and its commitment to combating crimes against the financial interests of the EU. The EPPO, as the independent public prosecution office of the European Union, is mandated to investigate, prosecute, and bring to judgment such offenses. The success of this EPPO multi-jurisdictional VAT investigation was a result of collaborative efforts involving EPPO offices in Madrid (Spain), Porto (Portugal), Milan and Palermo (Italy), Paris (France), Graz (Austria), Valetta (Malta), Bucharest (Romania), Rotterdam (Netherlands), Frankfurt (Germany), and Vilnius (Lithuania).

The operation also received crucial support from Europol and national law enforcement agencies across the involved countries, highlighting the necessity of international cooperation in tackling complex cross-border financial crimes. All individuals concerned are presumed innocent until proven guilty in the competent courts of law, upholding fundamental legal principles even amidst large-scale criminal investigations.

This investigation signals heightened EPPO enforcement against sophisticated cross-border VAT fraud, particularly in the electronics sector. Lawyers should advise clients engaged in intra-community trade to review their VAT compliance frameworks and supply chain due diligence to mitigate exposure to missing trader schemes and potential criminal liability.

Source: Original reporting via European Public Prosecutor’s Office