- U.S. lawmakers have created a bill to protect investors against rug pulls
- The bill was introduced by Clyde Vanel, a member of the New York Assembly
- The bill seeks to criminally charge malicious crypto project developers
Lawmakers in New York have introduced a bill seeking to protect crypto investors against malicious developers out to defraud them through rug pulls. Tabled in the New York Assembly by the assembly’s Banks Committee chair Clyde Vanel, the bill labels rug pulls and other deceptive means of attracting crypto investments as criminal activities. Vanel wrote that the bill seeks “to amend the penal law,” something that may help reduce the number of scams, hacks, and rug pulls.
Developers To Hold Tokens for Five Years
According to the bill, a developer conducts a rug pull if they create a token and sell over 10% of the token’s supply “within five years from the date of the last sale.” This rule, however, exempts NFT creators whose collections have less than 100 collectibles or are worth less than $20,000 “at the time the rug pull occurs.”
The bill also includes private key and virtual token fraud. It defines private key fraud as an action by a person to have another person’s private key without an “affirmative consent.” The consent must show that the person understands the risks of sharing their private keys.
Virtual token fraud, on the other hand, involves using deceptive means to attract investors to buy or sell a token.
The bill proposes that offenders should pay a civil fine of up to $5 million or jailed for not more than 20 years. The bill comes at a time when financial regulators, law enforcement agencies, and countries across the globe are focusing on the crypto and blockchain world.
Regulators Are Changing Crypto Tune
The United States financial watchdogs, for example, have abandoned their regulation-by-enforcement approach in an attempt to work with the crypto industry to create favorable laws. Jurisdictions like Iran, Taiwan, and Europe are also formulating crypto-specific regulations.
Although the bill seeks to criminalize rug pulls and other types of crypto fraud, it’s unlikely that it’ll deter malicious actors from defrauding unsuspecting investors even if becomes law.
