New York State Assemblymember Clyde Vanel introduced Assembly Bill A06515, a legislative proposal aimed at criminalizing cryptocurrency fraud, including “rug pulls,” private key theft, and other deceptive practices in the crypto space. This bill, if passed, would amend New York’s penal law to establish specific criminal offenses related to “virtual token fraud,” marking one of the most targeted state-level efforts to combat fraud in the $2.7 trillion cryptocurrency market.
Key Provisions of Bill A06515
The bill defines a “rug pull” as a developer selling more than 10% of a virtual token’s total supply within five years of its last sale, with exceptions for smaller NFT projects. This targets scams where developers inflate a token’s value and then abandon the project, leaving investors with worthless assets. Penalties could include fines up to $5 million and prison terms of up to 20 years.
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Private Key Fraud: Unauthorized access or misuse of private keys—critical for controlling crypto wallets—would be criminalized unless explicit consent is granted, addressing theft and hacking incidents. Developers must publicly disclose their token holdings on their primary website, aiming to prevent undisclosed conflicts of interest.
Scope: “Virtual tokens” include security tokens and stablecoins, defined broadly as digital assets verified on peer-to-peer networks like blockchain, encompassing fungible and non-fungible tokens (NFTs).
The legislation responds to a surge in crypto scams, particularly in the memecoin sector. High-profile cases, such as the Libra project’s $107 million rug pull in early 2025 (causing a 94% price crash and $4 billion in investor losses), and Solana-based memecoin frauds leading to $485 million in outflows in February 2025, underscore the urgency. Posts on X and industry reports highlight that rug pulls alone accounted for significant losses in 2024, with the broader crypto scam ecosystem costing investors billions annually.
New York Attorney General Letitia James has long championed tougher crypto oversight, as seen in her 2023 Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act proposal and lawsuits against firms like KuCoin and Celsius. Bill A06515 builds on this, aligning with the state’s history of proactive regulation (e.g., the 2015 BitLicense) and recent enforcement against sanctioned entities like Russia’s Garantex.
The SEC and CFTC treat crypto variably as securities or commodities, but no federal law specifically criminalizes rug pulls, leaving enforcement to existing fraud statutes. A06515’s specificity contrasts with this ambiguity, though it mirrors broader U.S. efforts like Senator Dick Durbin’s Crypto ATM Fraud Prevention Act (February 2025).
Implications on the Crypto Industry
Investor Protection: The bill aims to deter fraud by imposing harsh penalties and enhancing transparency, potentially stabilizing New York’s crypto market. Immediate market reactions included a 2% Bitcoin and 1.8% Ethereum trading volume spike on March 6, per CoinMarketCap data.
Critics in crypto circles worry it could stifle innovation, with the five-year lockup period for developers seen as overly restrictive compared to traditional IPOs (often six months). However, exemptions for small NFT projects soften this for grassroots creators. Effective 30 days after passage, the law would empower prosecutors with clear authority, complementing the Martin Act’s broad anti-fraud powers, though some argue existing laws already suffice.
New York’s bill, if enacted, could set a precedent for other states, especially as the Trump administration’s rumored crypto-friendly shift (e.g., a U.S. Crypto Strategic Reserve) contrasts with state-level crackdowns. The A06515 awaits debate in the New York Assembly and Senate, with its fate hinging on balancing investor safety against blockchain innovation—a tension reflected in both legislative text and public sentiment.