New York bill aims to jail crypto fraudsters for up to 20 years

New York lawmakers are moving to crack down on crypto fraud through a new bill that criminalizes deceptive practices.

Assembly Bill AO6515, introduced on March 5 by Representative Clyde Vanel, seeks to address rug pulls, private key fraud, and undisclosed financial interests in virtual tokens.

Vanel, who chairs the Banking Committee and the Subcommittee on Internet and New Technology, has highlighted the need for stronger oversight as fraudulent activities rise in the crypto sector. (Editor’s Note: Scams related specifically to crypto phishing have declined 48% over the past year.)

According to the bill:

“With the advancement of this new [crypto] technology, it is vital to enact regulations that both align with the spirit of the blockchain and the necessity to combat fraud.”

Considering this, the bill aims to impose legal consequences on developers and industry participants engaging in misleading or exploitative behavior.

Bill details

One primary focus of the bill is rug pulls, scams where developers or project insiders promote digital assets to artificially drive up value before dumping their holdings, leaving investors with losses.

If passed, AO6515 would empower authorities to prosecute individuals involved in such schemes and address a growing problem that has intensified with the surge of memecoins.

Another key element of the legislation is classifying private key fraud as an offense comparable to debit card PIN theft.

This shift would impose stricter penalties on individuals who gain unauthorized or misuse access to private keys, strengthening protections for crypto users.

Meanwhile, the bill also introduces strict disclosure requirements for industry participants who hold stakes in virtual tokens they promote.

This provision would force developers to reveal wallet ownership details, helping investors detect potential conflicts of interest and manipulation.

The bill stated:

“Unique wallet ownership in any class of virtual tokens is critical information for investors in order to predict when a rug pull or other type of virtual token manipulation will occur. Buyers have the right to know the degree of control over the virtual tokens price that the developers have and the degree of consolidation of the tokens in the developers.”

The bill introduces severe penalties for violators, including civil fines of up to $5 million for individuals and $25 million for organizations. The bill also proposes prison sentences of up to 20 years for those convicted of serious offenses.