Operation Calypso: EPPO exposes €700 million China-EU VAT fraud ring

A sprawling cross-border investigation led by the European Public Prosecutor’s Office (EPPO) has disrupted a major criminal network responsible for the large-scale fraudulent import of goods from China into the EU.

The scheme, accroding to EPPO, is believed to have caused financial damage exceeding €700 million, involving the evasion of customs duties and VAT and exploiting legal loopholes through a sophisticated web of companies and enablers.

Investigation Calypso: €700M fraud scheme across 🇧🇬🇨🇿🇩🇰🇫🇷🇩🇪🇬🇷🇭🇺🇮🇹🇵🇱🇵🇹🇸🇰🇸🇮🇪🇸
10 suspects arrested, including customs officers. Millions seized in cash, crypto, luxury cars & property.
🔗 https://t.co/Q6HnHJTCz2 pic.twitter.com/T11UZ8A2W9
— European Public Prosecutor’s Office (EPPO) (@EUProsecutor) June 26, 2025

The coordinated operation, code-named “Calypso,” unfolded on 25 June 2025 with simultaneous raids in Athens, Madrid, Paris, and Sofia, the EPPO announced. It targeted criminal organisations that had set up a complex infrastructure across 14 countries: Bulgaria, China, Czech Republic, Denmark, France, Germany, Greece, Hungary, Italy, Poland, Portugal, Slovakia, Slovenia and Spain. In total, authorities carried out 101 searches at customs brokers’ offices, front companies, suspect residences, and the offices of tax consultants, lawyers, and transport firms.

Ten individuals were arrested, including two customs officers. Investigators seized €5.8 million in multiple currencies, such as euros, Hong Kong dollars, and crypto assets stored in digital wallets. They also secured 7,133 e-bikes and 3,696 e-scooters, along with 480 shipping containers currently being inspected at the Port of Piraeus. Other assets included 11 properties in Spain, 27 vehicles, and numerous luxury items such as watches, jewellery, and designer bags. In Greece, real estate, boats, and bank accounts were frozen under judicial orders.

The scheme: how it worked

The operation centred on imports arriving via the Greek port of Piraeus, where the criminal networks would massively undervalue or misclassify merchandise such as textiles, footwear, and electronics to reduce the customs duties owed. False documentation concealed the true nature and value of the imports. Customs brokers, accountants, and other facilitators helped clear the goods through customs using companies formally registered in Bulgaria but operating in Greece with Greek VAT IDs.

Once cleared, the merchandise was “sold” to companies in other EU member states under Customs Procedure 42 (CP42), which waives VAT at the point of importation if the goods are immediately shipped to another EU country. The criminal groups exploited this mechanism by routing the paperwork through a string of shell and buffer companies in countries like Germany, Hungary, Italy, Slovakia, and Spain.

However, the goods never reached their declared destinations. Instead, they were stored in tightly controlled warehouse hubs run by the organisations themselves and then distributed to end customers across France, Italy, Poland, Portugal, and Spain. Sales were made in cash, off the books, forming part of a parallel underground economy.

Crucially, some of the fake recipient companies were identity theft victims – legitimate businesses whose VAT credentials had been hijacked to legitimise the transactions. After the goods were distributed, all transport documents were destroyed to eliminate traceability.

A closed-loop criminal enterprise

The criminal networks orchestrated every part of the fraud cycle: creating fake invoices and shipping manifests, managing sham companies, and laundering proceeds through underground banking systems. By evading customs duties and VAT, they could offer significantly lower prices than legal competitors.

Money was repatriated to China using trade-based laundering methods, including cross-border invoice manipulation and black-market exchanges. Some operations offered money laundering services to other criminal groups.

Investigators estimate that the evaded customs duties amount to €250 million (a direct loss to the EU budget), while unpaid VAT exceeds €450 million, impacting both EU and national budgets.

Caption: Calypso seizure/EPPO