NY Sen. Thomas proposes to criminalize rug pulls and other crypto frauds

Senator Kevin Thomas seeks to provide prosecutors with a clear legal framework against crypto crimes that align with the spirit of the blockchain while combatting fraud.

New York State Senator Kevin Thomas introduced a new bill amendment request to establish certain offenses related to rug pulls and other frauds related to virtual token distribution, misuse of private keys and hidden interests in crypto projects.

The bill drafted by Sen. Thomas, Senate Bill S8839, calls for defining, penalizing and criminalizing frauds specifically targeted at developers and projects that intend to dupe crypto investors.

Through the bill, Thomas seeks to provide prosecutors with a clear legal framework against crypto crimes that align with the spirit of the blockchain while combatting fraud. It calls for a law amendment that will imply rug pull charges on developers that sell “more than 10% of such tokens within five years from the date of last sale of such tokens.”

Private key fraud involves disclosing or misusing another person’s private keys without prior affirmative consent. The bill also seeks to charge developers with fraudulent failure to disclose interest in virtual tokens that don’t publicly disclose personal crypto holdings on the landing page of the primary website.

The bill wa under committee review to determine its eligibility for floor consideration at the time of writing.

Related: US lawmakers introduce companion bill to ‘mitigate risks’ from El Salvador’s Bitcoin Law

Two members of the House of Representatives — California Representative Norma Torres and Arkansas Representative Rick Crawford — recently introduced legislation to mitigate financial risks tied to El Salvador adopting Bitcoin (BTC) as legal tender.

Today, I introduced the Accountability for Cryptocurrency in El Salvador Act with @RepRickCrawford. El Salvador’s adoption of #Bitcoin is not a thoughtful embrace of innovation, but a careless gamble that is destabilizing the country. https://t.co/Ag9K8fyHMb pic.twitter.com/4N8DN7895w

— Rep. Norma Torres (@NormaJTorres) April 5, 2022

As Cointelegraph reported, the proposed legislation seeks to analyze the risks to El Salvador’s “cybersecurity, economic stability and democratic governance.” According to Torres:

“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.”