The trial of a French-Israeli dual national accused of involvement in a huge tax fraud involving carbon credits known as the “scam of the century” opened in the French city of Lyon on Monday.
Stephane Alzraa, 38, was extradited from Israel following a request by French authorities.
He is being prosecuted on charges of organized fraud, aggravated money laundering and criminal conspiracy. The investigating judge who referred the case to the Lyon criminal court said that Alzraa was “at the forefront of the organization.”
According to French authorities, between 2008 and 2009 Alzraa and his accomplice, Michael Aknin, 39, ran several companies with the intention of carrying out large-scale tax fraud, concealing some €51 million (approximately $57 million) from French tax authorities.
The money was then allegedly transferred to bank accounts in East Asia.
Alzraa left France in 2015, skipping the country while on a prison furlough after he was sentenced to 30 months in June 2014 for abuse of property.
He was arrested in November 2016 under the name of David Blomberg during a routine traffic check in Tel Aviv and extradited to France, where he was imprisoned in April 2018.
Aknin remains in Israel, where he is fighting extradition. He is also wanted by French authorities for allegedly defrauding a communications company and deceiving its customers. He is suspected of artificially inflating sales reports to increase the commissions he received and then laundering the money he obtained, causing the company to collapse, the extradition statement said.
Three other individuals are also facing charges in the case — a straw man who was listed as a company manager, a secretary and Alzraa’s former partner.
In 2008 and 2009, multiple groups of fraudsters took advantage of differing tax rules in different EU countries to buy and sell carbon credits, or permission to emit carbon dioxide, on exchanges in Europe. The scammers would buy the credits in a country with no value-added tax, and quickly sell them in France or other countries that did charge VAT.
Generally, merchants have 90 days to remit the VAT they collect to the French government. The perpetrators took advantage of this time window to divert the money offshore and transfer it through a series of shell companies until it effectively vanished. The French government has estimated it lost €1.6 billion in unpaid VAT taxes this way and the total loss to all European countries is estimated at €5 billion-€10 billion.