First of all, the reason I said you is because it seems that Chabadtzkers know quite a bit about their minhagim etc., as evidenced from this thread, so I figured you might already have the answer.
Secondly, it's not a midrash, it's a Gemara in Shabbos and Sanhedrin.
Finally, in the link that Dan shared it says besheim the Rebbe that איטליה של יון does refer to Southern Italy.