The head of an Israeli soup kitchen has been arrested along with nine employees amid claims that the charity stole from its donors.

Hazon Yeshaya, which has been mired in a scandal since last year and was reportedly the subject of an undercover fraud investigation, was founded by Rabbi Abraham Israel 15 years ago. At its height it claimed to make and serve some 14,000 meals every day to Israel's impoverished.

This weekend the charity's head and his colleagues were arrested on suspicion of pocketing donations from fundraising groups based in the diaspora, including money given to the charity by Holocaust survivors. The charity had benefited from funds given by the Claims Conference, an organisation which supports Holocaust survivors.

According to Ha'aretz, investigators believe those accused of the scam may have sold food that was intended for the soup kitchen to external buyers, then kept the profits.

It is also thought that Hazon Yeshaya issued false lists of food distribution points around Israel. There are also allegations involving money laundering and forged documents.

A police spokesman said that the charity was one of Israel's largest and "receives tens of millions of dollars from donors abroad".

Suspicions were raised about the charity's activities last October, when donors to the British and Canadian arms of Friends of Hazon Yeshaya questioned where their money was going.

The British group, which raised about £750,000 annually, suspended its fundraising operations and shut itself down last December over the allegations, which in addition to financial mismanagement included complaints it had misled donors by funding religious training.