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, such as the popular rug-pull scam, where insiders vanish along with the funds of the investors.
If approved, the Bill would bring forward new criminal offenses regarding fraud that involves virtual tokens. That means that insiders who sell more than 10% of a token’s total supply within five years of its last sale could be prosecuted.
“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.
However, this does not imply to small NFT projects. 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 publicly list their token holdings on their website. This way, investors can see if they are really committed or just looking to make 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.
The recent memecoin scams seem to have prompted this new bill. 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 believes this bill is long overdue. “These activities should fall firmly within the jurisdiction of law enforcement agencies,” she told Cointelegraph. Lawmakers agree, and they’re pushing to punish fraudsters in the crypto space.
If passed, the bill would introduce heavy fines and prison time for those who deceive investors. Individuals could face up to $5 million in fines and 20 years in prison, while corporations involved in fraud could be fined up to $25 million.
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