Giulio Regeni, a 28-year-old PhD student, was found dead on the outskirts of Cairo, ten days after he went missing on January 25 on the fifth anniversary of Egypt's 2011 uprising.
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"The security forces managed to track down a gang in New Cairo that used to pose as policemen. It specialised in abducting foreigners and robbing them," the ministry said in a statement yesterday.
"There was an exchange of fire with the police and all members of the gang were killed." it said.
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"A red handbag was found, including a brown wallet, the passport of Regeni, his Cambridge University ID card, and a visa card," the statement said.
In addition to the bag, other things such as a wallet with a sum of Egyptian pound 5,000, three sunglasses and a female wrist watch was also found, it added.
Regeni's body was found beside a road on the western outskirts of Cairo. His body showed signs of torture, prompting prosecutors to say he had suffered a "slow, painful death".
Regeni, a PhD student at the department of politics and international studies at the University of Cambridge, was a visiting scholar at the American University in Cairo.
Rights groups and opposition figures speculated that he was killed by members of the Egyptian security forces - claims Cairo had strongly denied.