NFT designer arrested for alleged crypto tax evasion in Israel

A prominent designer based in Tel Aviv was arrested by Israeli authorities on Sunday for allegedly failing to disclose cryptocurrency income in tax reports, according to the Jerusalem Post.

Ben Benhorin, a digital artist and owner of independent studio Wuwa, creates generative code-based art and sells pieces on OpenSea. Benhorin has minted a number of NFTs on the platform over the past few years – one was originally listed at 9 ETH (worth $14,700 at press time).

Benhorin has an extensive work history with top digital firms. He was previously Design Director at DeviantArt, Design Director at website developer Wix, and VP at Yotpo, an e-commerce marketing platform.

Israel is making an example out of Benhorin in an attempt to recoup lost crypto-tax

Israel’s government is taking a close look at crypto regulation. The Ministry of Finance published recommendations on how to regulate digital assets in November. The proposals mainly focused on the taxation of crypto – according to Israel’s tax authority, uncollected crypto taxes between 2019 and 2022 could be worth several billion shekels. One billion shekels is worth $273 million at press time.

As part of the investigation, a warrant was issued to search Benhorin’s house, where documents, mobile phones and a crypto wallet were seized. Benhorin apparently earned 3 million shekels ($819,000) in income from NFT sales and did not report the conversion of 30 ETH ($49,000) that he received in exchange for them. Proceeds from NFT sales were then allegedly converted to other cryptocurrencies via Uniswap. According to Israel’s tax authority, the transaction is considered a sale and is therefore subject to capital gains tax.

• Capital gains in Israel are taxed at 25%.
• However, if it is considered a business expense, the tax rate can be up to 53%.
• When cryptocurrencies are converted to a traditional currency, the difference in the amounts (paid and purchased) is used for tax purposes.

Those unreported funds were then said to have been transferred between wallets, including cold wallets, which authorities say raised suspicions of asset concealment — an offense under Israel’s anti-money laundering laws.

Read more: NBA Top Shot NFTs may be unregistered securities, says judge

Benhorin’s professional career in design likely allowed the authorities to classify the sale of NFTs as part of his income. The artist is also head of department and university lecturer at Shenkar College in Tel Aviv.

Benhorin has been released by the Tel Aviv Magistrate’s Court under restrictive conditions while the authorities continue their investigation. The Protos have contacted Benhorin, who has yet to respond.

We’ll update this piece if we hear back.

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