New York lawmakers are taking a bold step to curb crypto fraud with a newly introduced bill targeting rug pulls, private key theft, and lack of transparency in token ownership. Assembly Bill 6515, sponsored by Assembly member Clyde Vanel, seeks to establish strict penalties for deceptive practices in the digital asset space.

Crackdown on Rug Pulls

Rug pulls—where developers suddenly abandon a project after selling off a large portion of its tokens—have become a major concern in the crypto industry. Under the proposed law, any developer who sells more than 10% of a project’s total token supply within five years of the last sale could face legal action.

However, the bill provides exceptions for smaller NFT projects. Developers creating fewer than 100 NFTs in the same series or NFTs valued under $20,000 at the time of the rug pull would not be subject to prosecution.

Private Key Theft Criminalized

Another key provision of the bill is the criminalization of unauthorized access or misuse of private keys. If passed, the law would make it illegal to access, use, or transfer private keys without explicit consent. This aims to prevent cases where developers or insiders misuse investor funds by gaining unauthorized control over crypto wallets.

Mandatory Disclosure of Token Holdings

To enhance transparency, the bill requires developers to publicly disclose their token holdings. This information must be made available on the project’s primary website, allowing investors to verify any potential conflicts of interest. This measure is designed to prevent undisclosed token dumps that can negatively impact investors.

Severe Penalties for Violators

If enacted, the bill would introduce harsh penalties for crypto-related fraud. Individuals found guilty could face fines of up to $5 million and prison sentences of up to 20 years. Non-natural entities, such as corporations, could be fined up to $25 million.

With this legislation, New York aims to set a precedent in crypto regulation, creating a safer investment environment while holding fraudulent actors accountable. If passed, the law would take effect 30 days after its approval, with enforcement measures implemented beforehand.