New York lawmakers are taking a firm stance against crypto fraud with a new bill aimed at curbing deceptive practices such as rug pulls and private key theft. The proposed legislation, Assembly Bill 6515, seeks to amend the state’s penal law by establishing criminal penalties for fraudulent activities related to virtual assets.

Stronger Penalties for Rug Pulls

One of the key aspects of the bill is tackling rug pulls, a common crypto scam where developers abandon a project after collecting investors’ funds. According to the proposed law, any developer selling more than 10% of a virtual token’s total supply within five years of the last sale could face prosecution.

However, exceptions apply to smaller NFT projects. The bill states that developers who create fewer than 100 NFTs within the same series or whose NFTs are valued at under $20,000 would not fall under this regulation.

Criminalizing Unauthorized Private Key Access

The bill also targets private key theft, which has led to significant financial losses for crypto holders. Under the proposed law, any unauthorized access, use, or misuse of private keys would be classified as a criminal offense, unless explicit consent is provided by the key owner.

This move aims to protect investors from hacking incidents and internal fraud, both of which have become prevalent in the crypto space.

Mandatory Token Ownership Disclosure

Transparency is another major focus of the bill. Developers will be legally required to disclose their token holdings on their primary website. This measure is designed to increase investor trust by ensuring that developers are upfront about their financial stakes in a project.

By enforcing public disclosure, lawmakers hope to deter developers from engaging in pump-and-dump schemes, where insiders artificially inflate a token’s price before offloading their holdings.

Severe Penalties for Crypto Fraud

If passed, the bill would introduce harsh penalties for individuals and entities involved in fraudulent crypto activities. These include:

• Fines of up to $5 million for individuals.
• Prison sentences of up to 20 years for serious offenses.
• Fines of up to $25 million for corporations and other non-natural entities.

The bill would take effect 30 days after passage, with regulatory bodies tasked with implementing enforcement measures before its official launch.