The European Public Prosecutor's Office is investigating a group that sold more than 1 million used phones as new, in a case code-named "Troy." Action has taken place in 19 countries, including Bulgaria, where the National Investigation Service took part.

Buyers across the EU lost at least 300 million euros. Several member states lost more than 30 million euros in VAT.

Seven people were arrested, including the two who ran the operation. The arrests took place in Austria, Germany and Spain. Searches and arrests began on Saturday, led by the European Public Prosecutor's Office in Cologne. A witness was questioned in the UK.

1,770 police, tax and customs officers took part in the operation, carrying out more than 160 searches. Besides Bulgaria and Germany, officers also acted in Austria, Belgium, Croatia, Cyprus, Estonia, Finland, Italy, Latvia, Lithuania, Luxembourg, Poland, Portugal, Romania, Slovakia, Spain, Switzerland and the Netherlands.

Investigators say the phones were built from used parts in Hong Kong and the United Arab Emirates, then shipped to the Netherlands. There, workers cleaned and packaged them to look new, drove them to warehouses in Germany, and sold them online to customers across the EU.

The group ran the scheme through shell companies in Austria, Bulgaria, Germany, the Netherlands and Switzerland. Prosecutors say the companies wrongly used the VAT margin scheme since 2018.

Under that scheme, a reseller pays tax only on the difference between the buying and selling price. But the rule applies only to goods on which VAT has already been paid. Since the phones were sold as new, sellers should have charged VAT on the full sale price.

The investigation found that the shell companies sold the used phones under the margin scheme both to end customers and to each other. Prosecutors say this misled buyers across the EU and caused VAT losses in every country where the phones were sold as new.