NFT designer arrested for allegedly evading crypto tax in Israel

A prominent designer based in Tel Aviv was arrested on Sunday by Israeli authorities for allegedly failing to disclose cryptocurrency earnings 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 its OpenSea. Benhorin has minted numerous 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 the head of design at DeviantArt, a design exec at website developer Wix, and a VP at Yotpo, an ecommerce marketing platform.

Israel makes example out of Benhorin in bid to recoup lost crypto tax

Israel’s government is looking closely at crypto regulation. Its Ministry of Finance published recommendations for how to regulate digital assets in November. 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 dollars at press time.

As part of the investigation, a court order was given to search Benhorin’s house, where documents, cell phones, and a crypto wallet were seized. Benhorin apparently made 3 million shekels ($819,000) in income from NFT sales and didn’t report the conversion of 30 ETH ($49,000) that he received in exchange for them. Revenues from NFT sales were then supposedly converted to other cryptocurrencies via Uniswap. According to Israel’s tax authority, the act is considered a sale and therefore subject to capital gains tax.

• 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 a traditional currency, the difference in the amounts (paid and purchased) is used for tax purposes.

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

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

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

Benhorin has been released by the Tel Aviv Magristrate’s Court under restrictive conditions while authorities continue their investigation. Protos has reached out to Benhorin, who has yet to respond.

We’ll update this piece should we hear back.

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