Israeli duo found guilty of large NFT tax evasion scheme worth $2.2M Dorian Batycka · 20 mins ago · 2 min read
The two were said to have made money from a sale of an NFT based on a 3D scan of the Western Wall, on of Jerusalem’s holiest sites.
Cover art/illustration via CryptoSlate
The Israel Tax Authority in Jerusalem is investigating two NFT creators for possible tax evasion.
The suspects, Avraham Cohen from Jerusalem and Antony Polak from Har Adar, allegedly did not report earnings of approximately 8 million Israeli New Shekel (NIS) from the sale of an NFT based on a 3D scan of the Western Wall, per The Jerusalem Post.
The suspects sold their NFTs through their website, holyrocknft.com. According to the investigation, the suspects sold 1,700 works since 2021 and obtained 620 Ethereum in payment, which was equivalent to approximately NIS 8 million at the time of the transactions. However, the suspects did not report these earnings as business earnings.
The suspects were released under restrictive conditions, including surrendering their digital wallets where the Ethereum is stored. The investigation is ongoing, and the suspects are awaiting further legal proceedings, The Jerusalem Post reported.
NFTs, crypto and taxes in Israel
- Capital gains in Israel are taxed at 25%.
- However, if it’s considered a business expense, the tax rate can be up to 53%.
- When cryptocurrencies are converted to traditional currency, the difference in the amounts (paid and purchased) is used for tax purposes.
This is not the first instance of NFT creators being investigated for tax evasion in Israel. Ben Benhorin, a graphic designer from Tel Aviv who creates and sells NFT art on the Opensea International platform under the brand name WUWA, was recently arrested for not reporting his revenues totaling approximately NIS 3 million from his sales. The suspect also did not report the conversion of 30 Ethereum-type digital currencies that he received as payments.
During the investigation, it was found that the suspect did not report any income from sales on the platform in his annual report to the tax authorities in 2021. The suspect allegedly converted some of the cryptocurrency he received for the sale of the NFT into other currencies using the Uniswap platform, which he did not report to the tax authority. Such actions are considered taxable sales.
Recent NFT Stories
Two individuals have been found guilty of an elaborate and multi-million dollar non-fungible token (NFT) tax evasion scheme in Israel.
Eyal Shalom and Yosef Azran were convicted at the Tel Aviv District Court on Wednesday. The pair’s thievery was said to total approximately $2.2 million USD.
Non-fungible tokens (NFTs) are digital assets secured with blockchain technology that are unique, tokenized variations of digital artwork or assets. NFTs are generally regarded as highly valuable and liquid, which makes them attractive assets to manipulate.
The two defendants were accused of taking part in a series of creative schemes to avoid payment of taxes on NFTs, with the two defendants being found guilty of intentional trading that was motivated by tax evasion.
Prosecutors stated that the pair evaded taxes by creating various layers of virtual wallets and transferring NFTs between them to create the impression of a lower value. This was done with the hope of reducing the taxable value of the income generated by the transactions.
After the conviction, prosecutors stated the following: “The law enforcement system needs to strongly fight tax evasion, and this case is an example of the system’s ability to fight those who wish to exploit the taxation system”.
The punishment for convictions of large-scale tax frauds in Israel can range from community service to up to three years in prison. It is currently unclear what the operational consequence will be for the convicted duo.