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We consider the problem of failure detection in sensor networks and we propose a new distributed detection algorithm based on Group Testing. We examine the presence of defective sensors by employing tests over locally gathered sensor measurements. Tests are represented with binary messages that sensors exchange over dissemination rounds using a gossip algorithm. We propose a novel probabilistic message design that allows the use of a low complexity decoder. Assuming that the maximum number of defective sensors is much smaller than the total number of sensors, we provide a bound on the number of linearly independent messages required for a successful detection of single or multiple defective sensors. Finally, simulations confirm that the proposed method outperforms algorithms based on random walk message gathering in terms of detection accuracy.