Israeli police have arrested five suspects in connection with an alleged money laundering operation that moved roughly 16 million shekels — about $5 million — in cryptocurrency transactions. The arrests were carried out on Tuesday, and investigators say the activity was coordinated through a WhatsApp group.

The case was led by investigators from the National Unit for Combating Economic Crime, which operates under the Lahav 433 unit. Authorities suspect the group provided crypto services without a license and failed to report the transactions to Israel's tax authorities. Those two alleged failures sit at the center of a wider pattern, in which Israeli authorities have moved against both unlicensed crypto operators and individual holders over the past year.

How the Alleged Loan Scheme Worked

According to police, the five suspects held distinct roles within the chat group. Individual trades involved sums of hundreds of thousands of shekels, while the total activity reached into the millions. The group allegedly funneled crypto proceeds into bank accounts as transfers labeled as loans, and investigators say agreements were drafted to support that cover story.

According to The Jerusalem Post, officers searched the suspects' homes on Tuesday morning. During the searches, they seized crypto wallets, computers, and tens of thousands of shekels in cash. The five were then questioned on suspicion of money laundering, fraud, and offering financial asset services without a permit.

In a statement issued Nov. 10, a police spokesperson said the case remains open, and police expect to question additional people as the inquiry continues — a sign that the inquiry's documented scope is not yet final.

Widespread Reporting Gap in Israeli Crypto Tax

The arrests follow a state audit that flagged weak crypto tax reporting in Israel. In November 2024, the State Comptroller found that only about 500 people reported crypto activity each year between 2018 and 2022, out of at least 200,000 who could have filed — a compliance rate of roughly 0.25%.

The audit also identified shortcomings inside the Tax Authority itself. Its capital gains form had not been updated to reflect the volume of crypto trading, a procurement process for software to calculate crypto taxes had dragged on for more than three years, tax assessors lacked calculation tools, and VAT auditors had received no crypto-specific training by the end of the review period.

The Tax Authority announced two further arrests on Oct. 6 over suspected failures to report crypto activity. One case involved trades worth tens of millions of dollars. In the other, a resident of Ashdod allegedly failed to report income from approximately $13 million in trades conducted between 2019 and 2021.

Enforcement has also extended to unlicensed platforms. In March 2025, authorities shut down the exchange Bitin for offering trading services without a license and fined it about $460,000. The exchange's operator had been denied a license in 2022 due to a tax-related conviction.

A voluntary disclosure program launched in August 2025 has drawn limited participation. Globes reported that only 58 taxpayers had used the program by June, covering roughly $50 million in crypto capital — well short of the up to $1 billion in tax revenue officials had anticipated.

In a separate development, Israel Discount Bank said on Nov. 11 that customers will be able to trade Bitcoin and Ether directly in its mobile app starting Nov. 26. Tax handling will be built into investment accounts, and the service will run on Fireblocks infrastructure — a regulated, bank-run counterpoint to the unlicensed and unreported activity at the center of this week's arrests.

On the regulatory side, a government tender published Nov. 3 seeks a system to calculate taxes on crypto disposals, the kind of calculation capability the audit found assessors lacked. Bids can be submitted from Dec. 3 to Dec. 15, 2026.