Israeli police have arrested five people in an investigation into suspected money laundering involving roughly 16 million shekels or about $5 million in cryptocurrency transactions, including proceeds allegedly moved into bank accounts under the cover of loans.
Summary
- Five suspects were arrested over alleged money laundering, fraud and unlicensed financial services.
- Investigators say loan agreements helped disguise crypto proceeds transferred into legitimate bank accounts.
- A state audit found only 500 annual crypto activity reports against 200,000 potential filers.
Israel Police’s spokesperson said in a Nov. 10 announcement that Lahav 433’s economic crime unit had detained the suspects over crypto exchange transactions allegedly carried out through deceptive methods without reporting them to the tax authorities.
The statement put the suspected activity at 16 million shekels and said investigators expected to question more people as the inquiry continued.
Crypto proceeds allegedly entered banks as loans
According to The Jerusalem Post, the five suspects held different roles in a WhatsApp group used to arrange cryptocurrency trades. Individual transactions involved hundreds of thousands of shekels, while the activity under investigation totaled millions.
Investigators suspect the operation went beyond arranging exchanges without the required license. Crypto proceeds allegedly reached legitimate bank accounts through transfers presented as loans, with agreements drawn up to support that description.
During searches of the suspects’ homes on Tuesday morning, officers seized wallets, computers suspected of being used in the alleged offenses, and tens of thousands of shekels in cash, the newspaper reported.
The five were questioned on suspicion of money laundering, providing financial asset services without a permit and obtaining something through fraud. The allegations remain part of an ongoing investigation.
Israel’s crypto reporting gap predates the arrests
A November 2024 audit by Israel’s State Comptroller found that an average of only 500 people reported cryptocurrency activity annually between 2018 and 2022, compared with an estimated minimum reporting potential of 200,000 users.
The report put the reporting rate at approximately 0.25%. Its examination ran from October 2023 through February 2024 and covered the Tax Authority, with supplementary work involving the Bank of Israel and other public bodies.
Beyond low reporting, auditors identified problems with the administration of crypto taxes. The authority had not adapted its capital gains reporting form or reporting frequency to the volume of transactions and calculations involved in digital asset trading.
The audit found that procurement of dedicated software to calculate crypto capital gains and tax had dragged on for more than three years. Tax assessors lacked technological calculation tools, and VAT auditors had received no cryptocurrency training by the end of the review.
Earlier enforcement targeted unlicensed crypto services
As crypto.news previously reported, authorities shut down Bitin in March 2025 for providing crypto trading services without the required license and imposed a fine of approximately $460,000.
The exchange’s operator had been denied a license in 2022 because of a criminal conviction tied to tax offenses, according to that coverage, which cited Finance Magnates. Trading continued despite the rejection.
Voluntary disclosure produced limited participation, too. Globes reported in June that only 58 taxpayers had used a program to correct crypto tax filings, with disclosures covering around $50 million in crypto capital. Officials had expected as much as $1 billion in tax revenue from undeclared profits.
The program, introduced in August 2025, offered eligible taxpayers protection from criminal proceedings if they corrected their reports and paid the full tax owed. The June coverage said the published deadline was Aug. 31, 2026, and eligibility included a limit tied to the value of holdings in December 2024.
Banks are preparing services with built-in tax handling
Israel Discount Bank announced on Nov. 11 that customers would be able to trade Bitcoin and Ether through its mobile app from Nov. 26, with tax handling integrated into investment accounts.
The planned service will use Fireblocks infrastructure, hold assets in bank wallets, and send sale proceeds directly into customers’ accounts. Access will be limited to private customers aged at least 18 whose accounts support securities trading, subject to enrollment and the bank’s terms.
According to Globes, tax deductions will allow crypto capital gains and losses to be offset against other investments in customers’ portfolios. The bank announced a six-month account management fee waiver, although trading commissions were not disclosed.
Meanwhile, a government tender notice published Nov. 3 lists a Tax Authority procurement for a system to calculate tax arising from crypto disposals. The notice identifies procedure 2026/7 and sets the bid submission period from Dec. 3 to Dec. 15, 2026.
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