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New York lawmakers are taking a strong stance against crypto fraud. Assemblymember Clyde Vanel has introduced a new bill aimed at curbing deceptive practices, including rug pulls and private key theft.
The proposed legislation, Assembly Bill 6515, seeks to amend the state’s penal law by establishing criminal penalties for fraudulent activities related to virtual tokens. These include rug pulls, private key fraud, and failure to disclose financial interests in digital assets.
Under the proposed law, developers selling more than 10% of a virtual token’s total supply within five years of the last sale could face prosecution for rug pulls, with exceptions for smaller NFT projects.
“A developer, whether natural or otherwise, is guilty of illegal rug pulls when such developer develops a class of virtual token and sells more than ten percent of such tokens within five years from the date of the last sale of such tokens,” according to the bill’s text.
“This section shall not apply to non-fungible tokens where a developer has created less than one hundred non-fungible tokens that are regarded as part of the same series or class of non-fungible tokens or where such non-fungible tokens regarded as part of the same series or class are valued at less than twenty thousand dollars at the time the rug pull occurs,” the bill read.
Meanwhile, the unauthorized access or misuse of private keys would be criminalized unless explicit consent is given.
The bill also mandates that developers publicly disclose their token holdings on their primary website to enhance transparency.
If enacted, the law would take effect 30 days after passage, with provisions for regulatory bodies to implement enforcement measures before the effective date.
Through this bill, New York lawmakers hope to create a safer environment for investors while holding bad actors accountable.
The bill aims to prevent widespread scams that have plagued the crypto industry in recent years. Investors have lost millions due to misleading projects and sudden liquidity withdrawals.
If passed, it would impose severe penalties on individuals and companies engaging in deceptive cryptocurrency practices, including fines of up to $5 million and prison sentences of up to 20 years. Non-natural entities, such as corporations, could face fines of up to $25 million.
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