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NY senator introduces bill on rug pulls

NY senator introduces bill on rug pulls

Last updated 29th Jun 2022
Disclosure
  • Senate Bill S8839 aims to define, penalize, and punish frauds and projects intending to dupe crypto investors
  • Investors should avoid supporting projects by anonymous or unfamiliar developers
  • Look for locked liquidity

New York Senator Kevin Thomas introduced a new bill to establish certain offenses related to common crypto-related crimes like rug pulls, private key fraud, and clandestine interests in crypto projects, CoinTelegraph reported.

Senate Bill S8839 aims to define, penalize, and punish frauds and projects intending to dupe crypto investors.

Bill summary

The bill “establishes the offenses of virtual token fraud, illegal rug pulls, private key fraud and fraudulent failure to disclose interest in virtual tokens.” Through it, the senator aims to provide prosecutors with a legislative framework against crypto crimes. It calls for an amendment that will impose 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.”

What is a rug pull?

A rug pull is when scammer developers create a new crypto coin, pump the price and then take the liquidity away, abandoning the project and disappearing with the money. Then, the coin’s price loses almost all of its value.

What is private key fraud?

Private key fraud involves misusing or sharing another person’s private keys without their consent. If the senator’s bill is passed into law, developers can be charged with criminal failure to disclose interest in digital assets. They will have to share personal crypto holdings publicly, for example on the project’s official website.

Other legislative developments

Arkansas Representative Rick Crawford and California Representative Norma Torres recently introduced bills to reduce financial risks connected to El Salvador’s adoption of Bitcoin. The bills aim to analyze the risks to El Salvador’s “cybersecurity, economic stability and democratic governance.” Torres said:

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.

How to avoid falling victim to a rug pull

Investors should avoid supporting projects of anonymous or unfamiliar developers. It’s best to invest in projects by people who are known in the crypto community. Ideally, they should have a good reputation and at least seem legitimate.

Locked liquidity

There is a very easy way to tell a legitimate crypto from a scam coin: checking whether the liquidity is locked. The liquidity supply should be locked as the team can run away with it if it isn’t.

Selling limitations

A fraudulent actor can code a coin to limit the sell orders. This is a typical sign of a scam project.

Daniela Kirova

Daniela Kirova

Daniela is a writer at Bankless Times, covering the latest news on the cryptocurrency market and blockchain industry. She has over 15 years of experience as a writer, having ghostwritten for several online publications in the financial sector.