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Proposed New York Bill Looks to Criminalize Crypto Rug Pulls and Scams

2 mins
Updated by Ryan Boltman
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In Brief

  • A newly proposed bill in the New York legislature is looking to criminalize fraudulent activities within the crypto space.
  • New York has shown a willingness to introduce crypto regulations to help sanitize the industry.
  • The U.S. senate also has a bill designed to protect it from El Salvador’s Bitcoin decision.
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New York State Senator Kevin Thomas has proposed a bill that’ll criminalize rug pulls and other fraudulent activities within the crypto space.

The proposed bill also seeks an amendment to establish crimes related to virtual token distribution, hidden interest in crypto, and private key misuse as crimes under the New York law.

The bill titled Senate Bill S8839 seeks to define, penalize, and criminalize fraud and target developers and projects created to dupe crypto investors. With the plethora of such projects within the industry, a law like this is long due.

The bill will provide prosecutors with more clarity on pursuing crypto crimes while operating in line with blockchain technology and combating fraud. A part of the bill defines rug pull as when developers

Sell more than 10% of such tokens within five years from the date of the last sale of such tokens.

It also defines private key fraud as misusing or disclosing someone else’s private keys without their consent. Developers who also fail to publicly disclose their personal crypto holdings on the main page of a project website could be liable for fraudulent failure to disclose an interest in virtual tokens.

The bill has now been referred to the Codes Committee of the Senate for review. There’s also a companion bill filled at the lower chamber by Clyde Vanel. Titled Assembly Bill A8820, it has also been sent to the Codes Committee of the lower chamber.

With the bill in the New York legislature, the state further shows its position as a pioneer in the regulatory framework for crypto. There’s no specific date on when the review of the bill will be done. But if it’s approved and passed, it’ll go into effect after 30 days of passage.

Another Bill looks to protect the U.S. from El Salvador’s bitcoin decision

New York isn’t the only place where lawmakers propose bills on crypto. At the federal level, two members of the House of Representatives, Norma Torres of California and Rick Crawford of Arkansas, introduced a bill to mitigate the risks associated with El Salvador’s adoption of Bitcoin.

The bill will analyze how Bitcoin adoption could affect cyber security, democratic governance, and economic stability in El Salvador and how such could affect the U.S. 

Rep Norma Torres criticized El Salvador’s decision to adopt Bitcoin, stating that it “is not a thoughtful embrace of innovation, but a careless gamble that is destabilizing the country.”

“El Salvador is an independent democracy, and we respect its right to self-govern, but the United States must have a plan in place to protect our financial systems from the risks of this decision,” she added.

El Salvador’s president, Nayib Bukele, has criticized this bill, saying the U.S. government has no right in the affairs of his country.

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Oluwapelumi Adejumo
Oluwapelumi believes Bitcoin and blockchain technology have the potential to change the world for the better. He is an avid reader and began writing about crypto in 2020.