New York Lawmakers Are Taking Further Steps Against Cryptocurrency Fraud Cases

On March 5, 2024, Assembly member Clyde Vanel introduced Bill A06515, whose purpose is to safeguard investors from dishonest practices

Lawmakers in New York are rolling up their sleeves to take further steps against cryptocurrency fraud cases.

As reported by Cronos on March 5, Assembly member Clyde Vanel introduced Bill A06515. The purpose of this bill is to safeguard investors from dishonest practices, such as the popular rug-pull scam, where insiders vanish along with the funds of the investors.

If approved, the Bill would bring forth new criminal offenses regarding fraud that involves virtual tokens. That means that insiders who sell more than 10% of a token’s total supply could be prosecuted.

“A developer, 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,” part of the bill reads.

However, this does not apply to small NFT projects or fractions of an NFT series, and it is not clear how the 10% threshold will be applied in cases where there are multiple token classes.

The bill also makes private key theft a crime, ensuring no one can access another person’s crypto without permission.

To keep things more open, project insiders will have to list their token holdings on the project’s website. This way, investors can see if they are really committed or just planning a quick exit.

If the bill becomes law, it will go into effect 30 days after it passes, giving regulators time to set up enforcement measures.

This new bill comes amid a series of crypto scams. One of the latest was the Libra token collapse, a project that was endorsed by Argentine President Javier Milei. When it was launched on February 15, the token touched a high of $5.00, however, insiders reportedly siphoned $107 million, causing the token’s value to crash 94% in hours and wiping out $4 billion in investor funds.

The crypto world has also seen a rise in Solana-based scams, with over $485 million in outflows in just February. Many investors are pulling their money from risky projects, hoping for safer options.

Crypto regulation expert Anastasija Plotnikova told Cronos that this bill is long overdue. According to her, these activities should fall firmly within the jurisdiction of law enforcement agencies.

Lawmakers are prepared to punish those involved in crypto fraud with significant fines and prison time. Individuals could face up to $5 million in fines and 20 years in prison, while corporations could be fined up to $25 million.