Crazy issuance of 450 million fake invoices! 93 Italian companies involved in fraud, 6 charged, 11 million assets seized
On October 11, 2026, it was reported that the Varese Financial Police Economic and Financial Police Team and the Milan Financial Police Department were operating together. The European Prosecutor's Office (EPPO) Milan and Palermo offices are responsible for coordination. The code name for this operation is "Hermes". The pre-trial judge of the Milan court signed the order. They are investigating a value-added tax "circular fraud" case involving electronic and IT product trade across multiple European countries.
During the operation, 6 individuals were subjected to personal coercive measures. Two suspects were imprisoned in Rome, one was placed under house arrest in the province of Bergamo, and the other three were restricted from living in Salerno and Rome. The judicial department also issued warning seizure orders for the property, funds, and assets of 8 investigated individuals and 3 involved companies, totaling 11 million euros.
In Italy alone, there are 93 companies involved in the case. They are distributed in Brescia, Bergamo, Milan, Rome, Salerno, Como and other places. From 2022 to 2025, these companies issued false invoices totaling over 450 million euros.
This operation is part of the joint law enforcement across Europe. The headquarters of the European Prosecutor's Office is in Luxembourg, under unified command. Police and law enforcement agencies from countries such as Spain, Malta, Portugal, France, Austria, the Netherlands, and Germany are also taking action together. Multiple countries' police have conducted over 300 raids on individuals and businesses in various locations, and have also taken a series of seizures and coercive measures. In the investigation in Italy, the police also seized the involved funds stored in Swiss banks.
How is' circular fraud 'done? It mainly exploits the policy loophole of exempting cross-border commercial transactions from value-added tax within the European Union. Criminals secretly insert a fake economic entity, commonly known as a "shell company" (cartel), into the real business transaction chain. This shell company does not have to pay value-added tax when importing goods from suppliers in other EU countries. But later on, when it sold the goods to a domestic Italian company involved in the case, it falsely issued invoices containing value-added tax according to Italy's standard tax rate.
The Italian financial police said that the key lies in this step: when the shell company receives the payment and value-added tax from the buyer, it does not hand over the tax to the state, but instead sells the goods at a price lower than the cost, swallowing up all the value-added tax. This type of company is called a 'missing trader'. They usually find puppets as legal entities, and they don't stay open for long, usually closing down within two years. Then another batch of new companies that change soup but not medicine will continue to work.
The financial police department also said that there are many cover up links for this scam. In order to prevent regulatory authorities from discovering, the goods will be sold again at a low price to other Italian companies, known as "buffer companies". These companies were stuffed into the trading chain to disrupt investigators and conceal the true beneficiaries behind the scenes.
The real beneficiaries of the scam are the physical operating enterprises called "brokers". After purchasing invoices with value-added tax from buffer companies, they apply to the government for huge value-added tax refunds or tax deductions. By relying on this illegal price advantage, they can not only dump at low prices in Italy to suppress their peers, but also re export the goods and sell them back to the overseas "conduit" company that originally shipped them. In this way, the entire criminal chain is connected end to end, like a carousel, constantly deceiving the country's tax payments.
