If a new bill passes in the New York legislature, DeFi rug pulls, scams, and other investor-damaging fraudulent activities will be illegal and pursued with the full force of the law.
The bill, described under S8839 and forwarded by New York Senator, Kevin Thomas, seeks to make amends to penal law. Besides, it shall establish specific crimes related to virtual token distribution activities executed via initial coin offerings (ICOs), initial decentralized exchange offerings (IDOs), and other crowdfunding alternatives.
It will also explore crimes on hidden interest rates, private keys misuse, and other illegalities, classifying them as criminal activities within the stringent state. The bill clarifies that virtual tokens are securities. In their classification, securities include all forms of stablecoins, some crypto assets, and leveraged tokens in their present state.
Most crucially, the bill clarifies, defining a crypto rug pull as when the issuing team sells at least 10 percent of the total supply from the last sale date. In their assessment, rug pulls have been “wreaking havoc” on the cryptocurrency industry.
On the other hand, private key fraud is when an entity—custodian or individual—exposes someone’s else passphrases without their express consent.
The bill declares that crypto developers of a project who fail to disclose their holdings on the main page of their project’s website may commit a criminal act.
The New York Bill “Aligns with The Spirit of the Blockchain”
Notably, the bill’s content would look at precisely defining, penalizing, and criminalizing projects and culpable initiators set at duping crypto investors. Subsequently, all illegal acts in the global blockchain space and negatively impacting New York residents would be subject to thorough investigations. This bill empowers prosecutors to pursue crypto crimes. Most importantly, it will help tackle fraud plaguing a multi-billion industry that’s rapidly expanding but insufficiently regulated.
The community has lauded the decision by New York to intervene with proper regulation. Crucially, Senator Kevin Thomas, as noted in the bill, is keen to provide relevant laws that “align with the spirit of the blockchain”. This bill, if made into law, shall foster growth and adequately cushion crypto investors against fraud. The law, they add, is necessary to provide long-lasting deterrence to the ever-evolving schemes in the crypto industry.
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