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NY Senator Thomas proposes criminalizing rug pulls and other crypto scams

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

Drafted by Senator Thomas, Senate Bill S8839, the bill calls for the definition, punishment, and criminalization of fraud specifically targeting developers and projects that intend to deceive cryptocurrency investors.

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A clipping from Senate Act S8839. Source: nysenate.gov

Through the bill, Thomas seeks to provide prosecutors with a clear legal framework against crypto crimes that conforms to the spirit of blockchain while fighting fraud. It is calling for a change in the law that will impose fees on developers who sell “more than 10% of such tokens within five years from the date of the last sale of such tokens.”

Private key fraud involves the disclosure or misuse of another person’s private keys without prior consent. The bill also aims to charge developers with fraudulent non-disclosure of interest in virtual tokens who fail to publicly disclose personal crypto holdings on the primary website landing page.

The bill has been reviewed by committee at the time of writing to determine if it qualifies for a session level.

Related: US lawmakers are introducing a “risk mitigation” companion bill to 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 the financial risks associated with El Salvador’s adoption of Bitcoin (BTC) as legal tender.

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-government, but the United States must have a plan in place to protect our financial systems from the risks of this decision.”