Israel’s tax authorities are investigating NFT creators for alleged tax evasion
Israel’s tax authorities have arrested two NFT creators on charges of tax evasion and money laundering after allegedly failing to report $2.2 million in sales throughout 2021.
According to a recent report by the Israeli news agency Ynetnews, Avraham Cohen and Anthony Pollack, the owners and operators of the NFT project holyrocknft.com, have been arrested for not reporting millions of US dollars in revenue received from the sale of their digital works.
The investigation claims that the suspects have sold 1,700 NFTs since 2021 in exchange for 620 ETH, worth around $2.2 million, which has gone unreported. Tax authorities view this income as business income, but the couple did not report it as such.
In particular, the funds were transferred between several digital wallets, a move that amounted to money laundering. The Jerusalem Magistrate’s Court released the two on probation and ordered them to hand over the ETH tokens and keys to associated wallets.
Launched in 2021, Holy Rocks NFT is a non-fungible token project that offers three-dimensional scanned imaging of the holy site stones. The project’s founders reportedly appeared in court last year in an attempt to defend certain misunderstandings, including the fact that they did not scan images of the holy site’s stones.
Still, the project has agreed to halt the sale of Holy Rock’s NFTs until the end of legal proceedings, according to its website. “However, we want to make it clear that all other activities planned for the community will go ahead as planned,” the team behind the organization said.
The move comes after Ben Benhorin, a prominent designer based in Tel Aviv, was arrested last week by Israeli authorities for allegedly failing to disclose cryptocurrency income in tax reports. Data from OpenSea shows that Benhorin has minted a number of NFTs on the platform in recent years.
NFT hype cools amid crypto market crash
It’s worth noting that the hype over NFTs and metaverse assets has cooled dramatically over the past year amid the broader market downturn that has seen major cryptocurrencies like Bitcoin and Ethereum lose around 70% of their value compared to all the heights of time.
According to NFT experts at Casinos En Ligne, sales of non-fungible tokens fell by 83 percent year-on-year in 2022. Across all markets, including art, gaming and collectibles, NFT transaction volume fell by at least 83 percent.
The NFT space rose to a record high in January 2022 with monthly sales of $2.8 billion. However, this number saw a steep decline earlier this year following a series of bankruptcies and implosions that saw around $2 trillion wiped from the crypto market.
In early February, The Defiance Digital Revolution ETF, the first-ever ETF focused on NFTs and metaverse assets, announced that it will close at the end of February. Shares in the fund have declined by more than 72% since its debut.
